Small reductions to KiwiSaver fund managers’ fees are nothing to be celebrated, an adviser says.
A review of KiwiSaver default providers’ fees was met with little action from the industry.
Only two of nine providers moved their fee in response – ANZ and Kiwi Wealth. ANZ dropped its fee by just two basis points and Kiwi Wealth by five.
Commerce and Consumer Affairs Minister Kris Faafoi said the review was not primarily aimed at reducing fees, although the changes would mean $1 million in fee savings for members over the rest of the default providers’ terms.
“But I have been very clear that we want to see strong competition between KiwiSaver providers and fees going down. The cumulative effect of fees and returns can make a big difference to how effective the funds are at providing for people’s retirement.”
Adviser Brent Sheather said more action was needed.
“If I was in the favourable position of being a default provider I would be offering to reduce fees further and talking to my competitors off-the-record to see if we all sing from the same songbook…probably illegal under anti-competitive laws but do we think the fact that everyone has similar fees is a coincidence?
“I don’t think there is anything to be celebrated in the small reductions made.”
The Financial Markets Authority updated its KiwiSaver tracker tool for the December quarter. It shows fees as a proportion of returns.
Growth funds were some of the poorer performers in the three months – Booster’s geared growth fund had 15% of its returns taken in fees – a figure that rose to 16.6% of its trans-Tasman share fund’s returns. Fisher Funds Two Equity scheme’s fees were equal to 9.3% of returns and the Lifestages Growth Portfolio fund’s fees were 21.4% of returns.
Sheather said the tool understated fees because it did not include trading costs.
The process for the next appointment of default KiwiSaver providers will start in 2019, and Faafoi said fees would be a significant factor in the tendering and appointment process.