Comparing fees

Comparing KiwiSaver schemes on the basis of fees is nearly impossible.

Our latest review of KiwiSaver fees (at www.consumersaver.org.nz) shows many companies charging an administration fee, management fee, trustee fee, and monthly membership fee - all for different percentages or values. Most schemes have confusing and imprecise fee information, peppered with disclaimers and loopholes.

For example ASB's investment statement says it "may charge certain other fees such as entry fees, exit/transfer fees, switching fees, contribution fees, transaction fees, custodial and advisor fees". It also says that it can alter the trustee fee at any time and that "there is no maximum to the Adhoc Expenses".

"Reasonable" fees

As a matter of fact there is a limit to how much the fees can be amended, although no-one's quite sure what that limit is. The fund manager can change the amount of fees it charges at any time, as long as it tells the Government Actuary (the regulator of superannuation schemes). But the fees can only be changed to an amount deemed "reasonable" by the High Court.

If you don't think your fees are reasonable, you can complain to the Government Actuary (who's part of the Ministry of Economic Development). If that fails, you need to apply to the High Court - where it costs $1100 to file a claim and lawyers charge hundreds of dollars per hour. You also face the very real possibility of paying the defendant's costs if you lose. In short, challenging the "reasonableness" of your fees is nearly impossible if the Government Actuary doesn't agree with you.

Even financial advisers find it tough to work out KiwiSaver fees. Robert Oddy Managing Director of International Financial Planners Limited says: "You have this myriad trail of fees being attached to investments. It's an approach that's difficult for investors to unravel, and it's difficult for us too." He says more streamlined investment strategies are preferable because they go through fewer sets of hands (and therefore incur fewer fees).

Robert Oddy also says that the lowest fee level should not become the only reason for selecting a fund manager - the qualifications and experience of the investment team, and a fully diversified investment portfolio are equally important. If you're unsure, be prepared to pay a fee for the advice - and do ask the adviser to explain why his or her advice can work for you.