Cave Financial Services

Hooray! KiwiSaver fees to be made clearer

Thu March 29th 2018

April 1st, 2018 will bring a new era of fee transparency to KiwiSaver.

Finally Kiwisaver customers will be able to see exactly what they are paying in dollar terms for the management of their funds - and for some in the market place it will be a real eye-opener.

Statements issued by KiwiSaver providers from this date must show customers their account fees in dollar figures. Until now, this has been documented as an often-confusing percentage value, however the recommendation for change was made by the Commission for Financial Capability (CFFC) in its 2016 Review of Retirement Income Policy in an attempt to make fees more transparent.

As a saver it is important you understand fees - what they are and why you're paying them. The costs charged for managing your money have a direct impact on your returns and they certainly matter….but it is very important that you do not make the mistake many will and assume this is the item which has the biggest impact on your Kiwisaver returns or balance. It usually isn't.

The performance success history of the investment manager matters, but how they have handled the rough times in the market matters more. The strategy, or level of investment risk you are taking will matter a whole lot more than the costs - in fact one of the traps for Kiwisaver investors is not understanding that lower costs often are associated with lower risk and lower performing funds.

Conservative funds, for example, tend to have lower fees than their Growth or Aggressive counterparts, but then this could be due to fund managers providing a range of different services, such as trading more frequently. Ensure the fund you are in is right for your age and approach to risk, not just the associated fees. The level of contributions you make, taking advantage of employer and government contributions, and investing at the correct Prescribed Investor Rate (PIR) are also essential components to the long-term performance of your fund, and can all have as much effect on your KiwiSaver balance as fee deductions.

So it is equally important that you do not make any snap decisions to move funds or Providers simply as a result of seeing your fees in monetary value for the first time.

Whilst it has been said that seeing fees in dollars rather than as a percentage will be an eye-opener for some savers, we see this as the ideal opportunity for you to better understand how your Kiwisaver works and what it is on track to do for you. Contact us on 09 985 3033 or email cavefinancial@qbg.co.nz to answer your Kiwisaver questions or for expert advice in language you'll understand.

P.S. feel free to share this with any of your friends or colleagues who might not be sure what this change means for them


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