For the third year in a row, the Kiwi Wealth KiwiSaver Scheme has been awarded the Platinum Award for ‘Outstanding value for money’ from SuperRatings, an Australasian superannuation industry-specialist.
The award is the result of an annual analysis of the KiwiSaver market, undertaken by SuperRatings. Twenty-five schemes were assessed for their ‘value for money’, according to a range of factors such as investment performance and strategy, fees and charges, advice (including member services and education), administration and governance.
In announcing this year’s results, SuperRatings also chose to highlight what it calls a ‘race to the bottom on fees’, saying that the amount a KiwiSaver scheme charges is not the best indicator of value for money.
SuperRatings CEO Mr. Adam Gee says “We remain highly concerned with the continual focus on fees by many participants within the KiwiSaver market.”
So what’s the problem?
SuperRatings’ research in the market demonstrates that, while fees are a good measure of how competitive a scheme is, they aren’t actually that helpful in demonstrating to customers the overall value for money a scheme might offer.
What’s more, SuperRatings’ findings actually show that there is often an inverse relationship between fees and investment outcomes achieved by members. So those funds with the lowest fees will often provide lower investment returns than their higher fee counterparts.
“As is evident from our modelling, whilst fee savings will deliver some benefit to members, the associated reduction in potential investment earnings is often four to five times the level of fees saved,” says Mr. Gee.
Low fees may look good, but, for many people, they ultimately may not pay off.
A better way
Instead, SuperRatings’ research shows that, in assessing value for money, it’s far better to look at the investment return achieved by each scheme, after all fees and taxes have been taken out.
In fact, Mr. Gee says that “the key measure of the industry’s success should be the net after fee and tax outcome.”
We at the Kiwi Wealth KiwiSaver Scheme agree – this level of detail is something we’ve always provided to our members. The account balance our members see is exactly what they would have in their hand if they could withdraw their money right now. We don’t believe in hidden charges or fees; what a member sees in their account is theirs entirely.
You get what you pay for
This kind of transparency is a guiding principle of our scheme. We believe in giving our members the whole picture about their money, not just part of it.
It’s also why we provide our members with the level of detail that we do, through their online accounts. Members of Kiwi Wealth can see exactly what contributions are going into their account, every cent, every day and where it came from and when. We also show them where their money is invested, right down to the individual shares, fixed interest investments and currencies.
More recently, we’ve expanded the educational tools we offer to include an online retirement income forecasting tool, available to members, which allows them to estimate what their future retirement income from their Kiwi Wealth KiwiSaver Scheme account could be – and lets them make on-the-spot adjustments to things like their contributions rate and selected investment fund - all at the touch of a few buttons. We’ve also recently added a new feature to this tool: alongside the potential retirement income from their KiwiSaver account, members can also see the potential additional income they could be eligible for from NZ Superannuation - giving them an even clearer picture of how their retirement is shaping up like.
And on top of all that, of course, our scheme offers members access to an in-house team of skilled professional investment managers, who research the best possible ways to invest your money, and factor in the appropriate amount of risk for the fund you’re in. We have a customer service team ready and waiting to take members’ calls and support teams like Finance and Operations, who work diligently in the background making sure everything gets done.
Joe Bishop, Head of Retail Wealth and Marketing, says “While we’re not set up to offer the lowest fees, with the Kiwi Wealth KiwiSaver Scheme, you’re getting what you pay for, and that’s value for money.”
“If people are only looking at a scheme’s fees, then they are only getting part of the story. They don’t get to see how much those low fees may cost them in the long-run.”
“The SuperRatings research is a vindication of the way we do things. It’s reaffirmed our commitment to total transparency - not as a gimmick or a sales tool - but as a way of making sure our members have access to relevant, accurate information, which allows them to make informed decisions that work best for them.”
This article reflects the personal views of the author at the date shown above. The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial products. You should seek financial advice specific to your circumstances from an Authorised Financial Adviser before making any investment decisions.