A New Era Kiwisaver Plan Declares War on Fees

A New Era Kiwisaver Plan Declares War on Fees

The launch of a new nonprofit KiwiSaver Plan today declares war on high fees, and a new online era for New Zealand’s future retirees.

Simplicity KiwiSaver, a 100% online, passively managed index based fund, aims to make the average New Zealander significantly better off in retirement.

Managing Director Sam Stubbs says Simplicity’s structure means its fees will be the lowest in the market, less than half the average cost, and cheaper than the current fees offered by all default providers.

“We have declared war on high KiwiSaver fees today", he said, ‘Because most New Zealanders don’t even realise the high fees that they are paying.’”

“Over their lifetime, the average Kiwi will spend around $36,000 on mobile phone charges, $37,000 on power, but $55,000 on KiwiSaver fees. It could be the biggest household expense that no one knows about,” he said.

By charging reduced fees via its nonprofit, online, index investing model, Simplicity estimates the average KiwiSaver (over a lifetime of saving) could be about $65,000 wealthier in retirement (based on like-for-like comparisons using industry data). Fees for the average KiwiSaver are currently 1.3% per annum. Simplicity’s fees by contrast will be $30 a year plus 0.30% per annum.

“This is a revolutionary model for New Zealand, already proven overseas, where we only charge people the actual cost of managing their Kiwisaver funds, with no profit margin built in,” Mr Stubbs said.

Simplicity’s launch comes at a time when the KiwiSaver industry, almost a decade old, has come under attack for high fees.

According to the Financial Markets Authority, fees paid to KiwiSaver providers totalled more than $1 billion between July 2007 and March 2015. The regulator also noted that KiwiSaver fees are among the top third of OECD countries.

Mr. Stubbs, former CEO of Tower Investments, said the original intention of KiwiSaver, to provide a low-cost retirement savings vehicle for New Zealanders, had become a gravy train for providers, many of them Australian owned banks.

“New Zealanders deserve more transparency, better online services, and significantly reduced Kiwisaver fees – little of which they are currently getting.” Mr Stubbs said.

Mr. Stubbs, who managed Tower’s KiwiSaver scheme before it was purchased by Fisher Funds as part of a company restructure, began working on Simplicity following a compulsory six-month period of non-compete.

Over a three year period, he has recruited more than 30 people to build and help launch Simplicity. Most of them are contributing their time and expertise on a pro-bono basis because of their conviction that New Zealanders deserve a better deal.

Two of the directors for Simplicity have previously managed the Westpac and Tower KiwiSaver Schemes, another is former Head of Supervision for the Financial Markets Authority.

Stubbs said lack of education and lack of transparency around KiwiSaver fees meant few people understood how fees work and what kind of impact they have on long-term savings.
“It’s time to break down the power that the big KiwiSaver funds have to extract unnecessary fees from New Zealanders, and put that money back into the pockets of hard working Kiwis,” he said.

Stubbs said Simplicity’s mission, as well as saving people money, was to raise financial literacy levels in New Zealand. He said providers were still not doing enough to educate their members about how KiwiSaver and the investment market works and the impact of high fees.

The process of joining Simplicity KiwiSaver is easy and takes only two minutes online, a change that Simplicity championed with regulators to improve conditions for KiwiSavers.

Simplicity will be available to the public from early September and people are invited to register their interest from today on.

Visit www.simplicity.kiwi

© Scoop Media