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KiwiSaver: Small changes in net return can make a big difference
CANSTAR researches 29 funds from 25 providers across four investment profiles to determine outstanding value for
workers.
Since the commencement of KiwiSaver in 2007 an impressive 2.53 million New Zealanders have become KiwiSaver members. The
schemes are offered by both banks and investment companies – and with the KiwiSaver Periodic Disclosure Regulations
introduced two years ago it’s easier now to compare funds on a like-for-like basis.
“As well as fund performance, one thing that savers should definitely check on their Kiwisaver statement is the amount
of fees coming out,” saidCANSTAR General Manager – New Zealand, Jose George. “CANSTAR’s analysis of 29 KiwiSaver Schemes
from 25 providers has found quite significant differences in the level of fees changed. These differences can
potentially add up to a lot of money over the course of your working life.”
Difference in Kiwisaver Fees
As an example of the range of fees charged, CANSTAR calculates the minimum, maximum and average annual fees that could
apply on the Kiwisaver schemes assessed, on an account balance of $9,000, as follows:ProfileMinAverageMaxBalanced78.25120.83162.30Cash50.0090.36144.00Conservative34.2095.53149.70Growth90.00130.97166.80
Source: Canstar. Based on fees attached to products assessed for this star ratings report.
“A difference in fees of, say, $80 per year might not look too bad when you’re just starting out with Kiwisaver,” said
Mr George. “But keep in mind that many Kiwisaver fees can be charged as a percentage of the account balance; as your
account balance grows, the difference between minimum and maximum fees you could paying will widen significantly. And
even those small differences in fees can have a large effect on your eventual nest egg, thanks to the power of
compounding.”
How much might you end up with?
Your KiwiSaver account, if treated with the respect it deserves, could be a handy little pot of gold for you thanks to
the power of compounding interest along the way. Assuming that a 30 year old starts a KiwiSaver Balanced Fund and
contributes $3,000 per annum, indexed at 3% for 30 years, potential nest eggs could be as follows:
Return – 6%, net of fees
Age Annual Contribution Balance at end of year
30 $3,000.00 $3,180.00
35 $3,477.82 $23,793.48
40 $4.031.75 $54,490.86
45 $4,673.90 $99,178.40
50 $5,418.33 $163,162.52
55 $6,281.33 $253,635.92
59 $7,069.70 $351,520.24
Return – 8%, net of fees
Age Annual Contribution Balance at end of year
30 $3,000.00 $3,240.00
35 $3,477.82 $25,454.87
40 $4.031.75 $61,391.85
45 $4,673.90 $118,016.11
50 $5,418.33 $205,645.34
55 $6,281.33 $339,536.57
59 $7,069.70 $494,773.56
“The above figures show the big difference that small changes in annual return can make,” said Mr George. “Importantly,
the calculations above are showing the return net of fees; after fees are taking into account. Obviously your Kiwisaver
fund, whichever one you choose, won’t achieve the same return year in, year out, but it’s nevertheless a good example of
the cumulative difference that changes in net return can have.
Which Kiwisaver providers offer outstanding value?
CANSTAR has compared 29 Kiwisaver funds from 25 providers, rated across four different profiles – “conservative”,
“balanced”, “growth” and “cash” and looking at more than 80 features of each product.
Several KiwiSaver products have been found to offer outstanding value this year, and have therefore been given five-star
ratings. Those products are:
Balanced:
Smartshares KiwiSaver Scheme – The Smartshares Kiwisaver Scheme really impressed on price, offering the cheapest balanced fund of those researched;
charging only $78.31 per year (with an average fund fee in this profile on researched funds of $120.84).
ASB KiwiSaver Scheme – The ASB Kiwisaver Scheme also charges fees below the industry average and combine this with some impressive features,
including unlimited free switches between asset profiles, free withdrawal and comprehensive online applications.
Kiwi Wealth KiwiSaver Scheme – As well as offering unlimited free switches and free withdrawals we were impressed with the online and mobile
presence of Kiwi Wealth KiwiSaver Scheme. The fees are also competitively below the industry average.
Cash:
BNZ KiwiSaver Scheme – The BNZ Kiwisaver Scheme is the cheapest cash fund in our research - $50.40 per annum compared to an industry average
for cash asset allocations of $90.48. The features offered are also impressive and include unlimited free switches and
withdrawals.
Kiwi Wealth KiwiSaver Scheme – This scheme is only just off the price mark at a very competitive $50.57 per annum. The features are also good, with
unlimited free switches and withdrawals and a consumer-friendly online experience.
Conservative:
Grosvenor KiwiSaver Scheme – In terms of conservative asset allocation products, the Grosvenor KiwiSaver Scheme is the best-priced in its class –
average fees are $43.02 compared to the average of $95.91 in this profile. Grosvenor also stood out with the top feature
score for its education resources and online accessibility to annual reports, investment statements and forms.
Kiwi Wealth KiwiSaver Scheme – Another solid performer in our comparison, the Kiwi Wealth KiwiSaver Scheme charges annual fees of $50.47, well below
the average across researched products of $95.91.
Growth:
ASB KiwiSaver Scheme – This scheme scored very well on features, offering unlimited free switches and withdrawals plus a comprehensive
online offering which includes application and balance check facilities. It is also price competitive, with fees well
below the average of products assessed.
Kiwi Wealth KiwiSaver Scheme – Outstanding product features include unlimited switches, free withdrawals, online and mobile application and account
access. Annual fees are also very competitive.
Superlife – With annual fees of just $90.60, Superlife is price competitive. It also offers unlimited free switches and has an
impressive range of educational resources.
Consumers can download the KiwiSaver Star Ratings report at www.canstar.co.nz
ENDS