The '24/7 Pledge' from JUNO calls on KiwiSaver industry

Halving the average KiwiSaver fee would save New Zealanders $7 billion in fees and boost the total KiwiSaver pool by $24 billion dollars by 2030.

The JUNO KiwiSaver Scheme has today issued its ‘24/7 Pledge’ which is both a promise from JUNO and a challenge to the rest of the KiwiSaver industry.

JUNO CEO and Founder Mike Taylor explains the pledge. “We promise from now until 2030, and beyond, we will:

• Keep our fees low and easy to understand
• Keep helping our members understand how their retirement goals are threatened by paying high fees over long periods
• Stay focused on providing great service and returns for members, in return for their fees
• Be a voice on KiwiSaver fees in the industry, including for the upcoming Government review of KiwiSaver default providers.

“We also publicly challenge other KiwiSaver providers to do the same,” he says. “The ultimate goal is that all Kiwis benefit from lower fees by 2030 regardless of whether they are with JUNO or another provider.”

The 24/7 pledge is based on Treasury projections for the growth of total KiwiSaver funds under management1 and on Sorted data showing the current average total fee for all KiwiSaver funds2. Kiwis currently have about $50 billion under management in their KiwiSaver accounts and according to even the most conservative Treasury forecasts, are on track to have four times that figure by 2030.

“That’s encouraging,” says Mike, “but by the time we get there, members will have paid a massive $13 billion in fees. That’s $25 million a week on average, and it’s unacceptable. So many New Zealanders already struggle to pay rent, mortgages, taxes and school fees – we think it’s high time other KiwiSaver providers dropped their fees and allowed Kiwis to enjoy more of their own hard-earned money when they retire.”

Halving the average fee from 1.2% to 0.60% would halve the amount lost in fees to $7 billion and push the total KiwiSaver balance in 2030 up by an extra $24 billion.

“High fees are not only a huge financial drag on retirement goals, they dissuade people from joining or staying in KiwiSaver,” Mike says. “There is a ‘missing million’ - a million Kiwis who have never joined, or who have opted out of KiwiSaver. We believe low – or no – fees would encourage at least some of them to reengage or participate for the first time. In fact, we know it will.”

JUNO is one of the country’s newest schemes, and member numbers have steadily climbed since it launched in August of last year. It charges no fees whatsoever for under-18s and balances under $5,000.

JUNO’s membership includes a substantial proportion of members new to KiwiSaver. “We are gradually chipping away at the missing million and we hope we are helping young Kiwis, and Kiwis with low balances, to form good investment habits. That learning experience is assisted by us not taking any money off them. They keep all the returns they get from deciding to save for their retirement,” explains Mike.

The JUNO KiwiSaver Scheme also charges low fees – monthly, and in easily understood dollar amounts - for everyone else. In fact, JUNO’s three KiwiSaver funds charge the lowest fees of all KiwiSaver funds on the Sorted Fund Finder – all less than 0.40%3.

“While many new members are young people drawn by zero fees, not all are. We are also seeing more and more members with large balances, because they understand the less that comes out of their account, the more is left in to grow. And if they’ve come from a provider charging high fees, they know that provider has to generate much better returns than we do, every year, just to match the impact of us charging less.” Some KiwiSaver providers have decreased their fees since JUNO was established. “But most have done very little to reduce their administration or management fees and have continued to profit at the expense of everyday Kiwis,” Mike says.

“We believe the time is right for KiwiSaver members to exert their power of choice. The Commission for Financial Capability’s review of retirement income policies will provide information about the New Zealand public’s perception and understanding of KiwiSaver fees, including the impact on their balances. And the Ministry of Business, Innovation and Employment and the Minister of Commerce will be making critical decisions this year and next about who will be able to be a default KiwiSaver provider. That process should, among other things, establish a fee standard from which all other KiwiSaver funds will be priced.

“We’ve pledged to help Kiwis make good decisions about how to invest for their retirement, which is a long way off for most. Part of that is returns, but part will be minimising as far as possible the costs of their investment,” he concludes.

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