KiwiSaver fees to cost thousands

New Zealanders saving for their retirement through a KiwiSaver fund could pay more than $60,000 in fees over the course of their working life.

A higher-than-expected uptake has resulted in fund providers collecting $36 million in the year to March 2009 - the equivalent of $36 for every KiwiSaver client.

That total is tipped to climb to $62 for every person in the scheme. And those just entering the workforce will pay the most over coming decades. Based on fortnightly payments with a 2% employer contribution, a 25-year-old graduate on $35,000 could expect to retire at 65 with a little over $500,000.

Investing in a low-risk scheme such as an ASB cash fund, the graduate could expect to pay about $12,000 over his or her working life.

However, investment in a high-risk venture, such as ASB's Global Sustainability Fund, would incur fees of more than $77,000 over 45 years.

A more conservative worker starting KiwiSaver at 35 and earning $50,000 a year would retire with about $300,000.

But they could pay fund management fees - depending on the level of risk involved - equivalent to a year's income over the course of 30 years to retirement.

And the news gets worse the older the KiwiSaver newcomer.

A 50-year-old coming to the scheme on $70,000 and a 2% employer contribution would earn about $105,000 by 65, and could pay as little as $2700 in fees over the course of the 15 years.

However, riskier funds could cost the client up to $10,000 to administer.

Investment in a high-risk Asteron International Share Fund would ultimately absorb $13,540 in various fees.

The KiwiSaver watchdog, Government Actuary David Benison, this week said providers should look to lower their fees, given the higher-than-expected KiwiSaver uptake. He told a superannuation funds conference more than 1.3 million had joined KiwiSaver so far, well ahead of early predictions of 855,000 by 2017.

But an industry body has said it is too soon for fees to begin falling.

"We understand where he is coming from, but he is a bit premature," Vance Arkinstall, chief executive of the Investment Savings and Insurance Association, said. He said KiwiSaver had incurred hefty start-up costs, which had yet to be recovered.

A random sample of account fees for funds offered by the Government's six default providers and four second-tier providers for a 35-year-old employee on $50,000.

Provider/Fund name Risk
Fees to age 65
ASB Sovereign Global Sustainability
High   $42,040
Huljich Diversified Med-High
Fisher Kiwisaver High   $31,830
AMP Aggressive High   $29,950
Gareth Morgan Growth High   $26,380
AXA Balanced Med   $24,080
Westpac Balanced Med-High   $22,560
Tower Balanced Med   $22,190
ING Balanced Med-High   $15,520
Mercer Conservative Low   $10,840



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