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Time's up for admin fees: Morningstar

KiwiSaver providers should drop their dollar-based annual administration fees, Morningstar says.

Thursday, February 1st 2018, 6:00AM

by Susan Edmunds

The research house has released its latest quarterly survey of the superannuation savings scheme.

Morningstar head of manager research Asia-Pacific Chris Douglas said, while he could understand the rationale for having a dollar-based admin fee, given the set-up costs of KiwiSaver, its time was up.

“Surely the set-up costs have mostly been covered now? It especially hinders small balances, a dollar-based admin fee can eat into returns. But, don’t expect competition to necessarily lead to lower fees. Many of the smaller providers actually have higher fees. Some much higher than the larger providers.”

He said “sunlight is the best disinfectant” and more transparency would help investors make an informed decision.

New rules that take effect from March will require providers to report fees in dollar terms.

“High fees may not be bad depending on the service levels and the returns you are getting,” Douglas said.

"So it’s important that investors think more broadly about any decision to move providers.”

It shows the strong performance of equity markets in the December quarter resulted in KiwiSaver funds with more growth assets outperforming more defensive funds.

All options produced positive results during the three months and for the year as a whole. Average multisector Morningstar Category returns ranged from 5.82% for the aggressive category to 1.9% for the conservative category

Top performers in the quarter against their peer group included Milford KiwiSaver Conservative 2.53% (multisector conservative), ASB KiwiSaver Scheme's Moderate 2.96% (multisector moderate), Milford KiwiSaver Balanced 4.39% (multisector balanced), Generate KiwiSaver Growth Fund 6.23% (multisector growth), and Booster KiwiSaver Geared Growth 7.82% (multisector aggressive).

But the survey showed that 83% of the $45.6 billion in KiwiSaver assets on the Morningstar database were held by the six biggest providers.

ANZ had the biggest share, at $11.6b, followed by ASB and Westpac.

Douglas said it would be good to see more competition. The share of the biggest six was only coming down slowly, he said.

“When you look at who is in the top six, the banks also dominate, which highlights the strength of the bank distribution network for KiwiSaver.”

Tags: KiwiSaver

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Lender Flt 1yr 2yr 3yr
ANZ 5.79 4.65 4.85 4.99
ANZ Special - 4.15 4.35 4.49
ASB Bank 5.80 4.59 4.69 4.79
ASB Bank Special - 4.19 4.29 4.39
BNZ - Mortgage One 6.50 - - -
BNZ - Rapid Repay 5.95 - - -
BNZ - Special - 4.19 4.29 4.49
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BNZ - TotalMoney 5.90 - - -
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Credit Union Baywide 6.15 5.20 5.25 -
Lender Flt 1yr 2yr 3yr
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
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Housing NZ Corp 5.80 4.69 4.79 4.79
HSBC Premier 5.89 3.99 4.19 4.69
HSBC Premier LVR > 80% - 3.85 - -
HSBC Special - - - -
Lender Flt 1yr 2yr 3yr
ICBC 5.80 4.59 4.69 5.09
Kiwibank 5.80 4.69 4.69 4.99
Kiwibank - Capped - - - -
Kiwibank - Offset 5.80 - - -
Kiwibank Special - 4.19 4.19 4.49
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 6.10 5.10 5.45 -
Resimac 5.30 4.86 4.94 5.30
RESIMAC Special - - - -
SBS Bank 5.89 4.85 5.05 4.49
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 4.19 ▼3.95 4.49
Sovereign 5.90 4.59 4.69 4.79
Sovereign Special - 4.19 4.29 4.39
The Co-operative Bank - Owner Occ 5.75 4.19 ▼4.35 4.49
The Co-operative Bank - Standard 5.75 4.69 ▼4.85 4.99
TSB Bank 5.80 4.69 4.69 4.99
TSB Special - 4.19 4.19 4.49
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Westpac 5.95 4.69 4.79 5.19
Westpac - Offset 5.95 - - -
Westpac Special - 4.19 4.29 4.49
Median 5.89 4.62 4.69 4.79

Last updated: 19 October 2018 6:18pm

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