One of the most important differences between “good” and “not so good” KiwiSaver providers, is fees.  Low fees, all else being equal, are better.  However, understanding fees is complex because of the way they are calculated, the impact of tax and, in many cases, a general lack of transparency.  Some providers don’t give full details of all their fees, or are careless in the use of terms like “net” and “gross” in their investment statements.

The Office of the Retirement Commissioner (ORC) provides a fee comparison calculator on the Sorted website.  This calculator aims to simplify the fees’ comparison process.  The results are broken down by “risk” band and the total fees paid of each option within a product are shown.  The calculator is not perfect, as not all the data it uses is consistent with the providers’ investment statements.  Also, by necessity, it must make assumptions about the future.  Some of the assumptions and the application of the assumptions, potentially distort the final comparison.  We also note that it combines the impact that different fee levels have on outcomes with the impact on the outcome, due to different strategies1. The resulting comparative fees are also affected by the level of the savings and the time to retirement.

However, while we have some reservations about the calculator, one thing is clear – SuperLife is very competitive and for most it is the overall lowest cost provider.

The chart uses a sample employee member, earning taxable income of $50,000 a year, who is aged 35 (i.e. has 30 years to age 65), pays 2% and whose employer pays 2%.   The chart shows the quartiles of the fees and SuperLife's relative position.  Each dot represents the total fees (i.e. administration, investment etc) over the 30 years.  The fees range from a high $50,600 to a low $7,180.  In this case “low” is better than high.  The highlighted dots represent SuperLife‘s range of investment options.

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SuperLife is in the lowest quartile, so it means that if you are a member of SuperLife's KiwiSaver scheme, you are in the group of providers with the cheapest fees.  In fact, SuperLife has an option that is the cheapest in each risk band.

 

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1In some cases higher fees appear to be charged by some providers, that are not higher fees, but caused by the assumptions and/or alternative strategies.