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KiwiSaver management fees skyrocket

NZ NewswireNZ Newswire 5/10/2016 Paul McBeth

KiwiSaver investment management fees climbed 28 per cent in the March 2016 year, outpacing the growth in funds under management as a rising number of members switched to more active schemes in a year when returns reduced.

Investment managers reaped $219.5 million in fees on KiwiSaver schemes in the 12 months ended March 31, up from $172m a year earlier, with fees on active schemes climbing by almost a third to $202m, the Financial Markets Authority's annual KiwiSaver report shows.

KiwiSaver membership rose to 4.8 per cent to 2.6 million in the year, and about 30,000 members with $405m of assets switched out of the default schemes.

Management fees were the biggest cost for members in 2016, with the tax bill on investment returns falling 21 per cent to $176.3m, administration fees up 5.8 per cent to $77.8m and trustee fees down 3.5 per cent to $5.5m. Other scheme costs rose 31 per cent to $23.1m.

Active schemes attract higher fees than the default, which largely invest in bonds and cash, as they include growth-orientated funds that require more oversight.

Active schemes fees were about 0.9 per cent of funds under management in 2016, unchanged from 2015, while default fees fell to about 0.7 per cent from 0.8 per cent.

Commerce Minister Paul Goldsmith said the report showed just three of the default scheme providers supplied total fees in their annual statements, which "isn't good enough".

"Consultation with KiwiSaver scheme providers has begun to ensure fee transparency is done in a way that is simple for the consumer to understand and easy for providers to implement," Goldsmith said.

"It is my expectation that any regulatory change required will be in place for the next annual statements and that KiwiSaver providers will already be working towards providing their members with the total fees they are paying."

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