Comparing KiwiSaver fees and taxes can be a little confusing. This is because the fees fluctuate and vary by fund type. In addition, your Prescribed Investor Rate (PIR) is your investment tax rate which is dependent on income and residency status. This article aims to cover the most common terms regarding KiwiSaver fees and taxes, and what you can expect to pay. Furthermore, we compare some of the highest and lowest fees in the industry and discuss whether you should base your decision on them.
For the most up-to-date information, you can simply search on any KiwiSaver provider website for their fee structure. Our data is based on Morningstar’s KiwiSaver Report for Q4 2021.
Can you guess which provider has the lowest fees? What about the highest? Continue reading as we break it down in this article. You can check to see how your provider stacks up against the industry’s highest and lowest KiwiSaver account fees. We also offer Free KiwiSaver recommendations completely tailored to your situation and lifestyle.
Management Fees – Percentage Of Balance
Yearly management fees can be as low as 0.2% and as high as 2.51% of assets in KiwiSaver funds.
This management fee is currently applied by most providers and exact fees vary between funds and KiwiSaver providers. It normally comes in the form of a percentage of net assets (your KiwiSaver investment balance). The only current exception is Juno KiwiSaver which charges a single flat dollar fee based on balance. Primarily it pays for the skills and expertise of your provider’s investment team that carefully manage the various KiwiSaver funds. It also pays for third-party regulators that protect and audit KiwiSaver investment options.
Generally speaking, KiwiSaver funds with high growth records are more volatile and risky than cash and conservative funds. For those reasons, they require more active investment by experienced financial professionals that in turn justify a higher management fee. These professionals identify companies to invest in, manage risk, and take advantage of opportunities that lead to higher returns. It is important to note however that high management fees do not guarantee higher returns. In certain market conditions, high-risk investments can be outperformed by cash and conservative investments. This is normally linked to uncertain times like the 2008 Global Financial Crisis or the Covid-19 pandemic in 2020. In fact, I remember it like yesterday when my KiwiSaver Growth fund decreased 20% in early 2020. Although the entire market was shocked, cash and conservative funds with lower management fees outperformed growth funds with higher fees. You can track this data yourself through your KiwiSaver login.
You aren’t required to make active payments towards management fees. They are simply calculated based on your KiwiSaver account balance and automatically charged. Thus, when you access your KiwiSaver login, management fees would have already been factored into your balance.
Administration & Other Fees – Flat Annual Fees
Yearly administration and other fees can be as low as $0 and as high as $39.96.
Some KiwiSaver providers charge administration or other fees to cover general business costs. These fees may cover things like marketing, legal, administrative, and customer service costs. Ultimately it is an internal business decision of your KiwiSaver scheme to structure costs and whether an administration fee is necessary.
There are 8 providers that do not charge any fixed annual administration fees. These are ANZ, ASB, BNZ, FANZ Lifestages, MAS, Milford, OneAnswer, Westpac. On the other hand, Aon charges $39.96 annually with Booster coming in second highest at $36/year.
If you want to switch KiwiSaver firms, some may charge a transfer fee (Aon = $35, and Booster = $30). However, most providers cover this cost through the yearly administration fee charged to all members.
With management fees, different funds offered by the same provider have different management fees. On the other hand, the administration fee is a single annual flat fee regardless of your investment portfolio structure. Therefore, you will pay the same flat fee no matter how many funds you are invested in with your provider.
Your Prescribed Investor Rate (PIR)
Your PIR is your investment tax rate which must be disclosed with your KiwiSaver provider during the sign-up application. In financial and tax terms, your provider is known as your Portfolio Investment Entity (PIE). If you don’t provide them with it, they will automatically apply the highest which is 28%. Therefore, it is very important to know your PIR to ensure you aren’t being overcharged on your KiwiSaver investment tax rate. You can find out what your rate should be by using National Capital’s PIR Calculator. In addition, we have written an article where we break down comprehensively how your KiwiSaver is taxed.
If you’re a New Zealand tax resident with no additional income outside of New Zealand, calculating your PIR is straightforward. You will fall under one of the three following categories:
- PIR = 10.5% (if you’ve made $14,000 or less in any of the two previous tax years).
- In addition, your total income (PIE + taxable income) is $48,000 or less.
- PIR = 17.5% (if you’ve made $48,000 or less in any of the two previous tax years).
- In addition, your total income (PIE + taxable income) is $70,000 or less.
- PIR = 28% (all other cases as an individual).
As Inland Revenue (IRD) assesses your income tax status each year, they may notice you aren’t using the correct PIR. If they do, they will let you and your provider know, however, it is your primary responsibility. We recommend that you review your PIR each tax year and let your provider know of any changes. If IRD does find out that you have been overpaying, you may receive a refund for that particular tax year.
Provider Comparison – Top 5 Highest Fees & Top 5 Lowest Fees
The KiwiSaver industry has become more competitive in addition to the most recent government push towards lower fees. Here are the top 5 providers and funds ranked highest and the top 5 ranked lowest in management fees.
Top 5 Providers & Funds With The Highest Management Fees
|
Provider & Fund |
Admin & Other Fees |
Management Fees |
5-Year Average Annual Return |
Returns After Management Fees |
|
Fisher Growth |
$18/year |
2.51% |
12.40% |
9.89% |
|
Aon Milford Growth |
$39.96/year |
2.12% |
13.10% |
10.98% |
|
Milford Active Growth |
$0 |
2.00% |
13.10% |
11.10% |
|
AMP Global Multi-Asset |
$23.40/year |
1.61% |
3.80% |
2.19% |
|
Aon Nikko AM Balanced |
$39.96/year |
1.55% |
8.70% |
7.15% |
Source: Morningstar December 2021 KiwiSaver Report
Top 5 Providers & Funds With The Lowest Management Fees
|
Provider & Fund |
Admin & Other Fees |
Management Fees |
5-Year Average Annual Return |
Returns After Management Fees |
|
Milford KiwiSaver Cash |
$0 |
0.20% |
– |
– |
|
OneAnswer Cash |
$0 |
0.23% |
1.60% |
1.37% |
|
ANZ Cash |
$0 |
0.23% |
1.60% |
1.37% |
|
Simplicity Conservative |
$20/year |
0.27% |
5.40% |
5.13% |
|
Simplicity Balanced |
$20/year |
0.29% |
9.30% |
9.01% |
Source: Morningstar December 2021 KiwiSaver Report
We can see a reasonable correlation between growth funds and higher fees. Similarly, cash and lower-risk funds offer lower fees. Although, as we will elaborate next, your choice shouldn’t be based solely on fees. There are other factors such as your personal circumstances, customer service, track record, and accessibility, to consider. This makes switching KiwiSaver not so clearcut if you are comparing the benefits and downfalls of certain providers.
Should I base my choice on fees?
For a comprehensive analysis, we have previously written a separate article on this topic. You can read about all the factors to consider here. The short answer is no. You shouldn’t change KiwiSaver based on who has the lowest fees. As we discussed, higher fees do not guarantee the highest returns either.
There are two aspects to discuss over fees, in particular, management fees. First is the difference in management fees between funds from the same provider. The second is the difference in management fees between comparable funds from different providers.
As we mentioned briefly, different fund types offered by the same provider can have different management fees. For example, let’s take a look at the Generate KiwiSaver management fees and the 5-year average annual return:
|
Generate Fund Type |
Management Fees |
5-Year Average Annual Return |
Returns After Fees |
|
Conservative |
1.21% |
6.60% |
5.39% |
|
Growth |
1.42% |
11.90% |
10.48% |
|
Focused Growth |
1.52% |
13.30% |
11.78% |
Source: Morningstar December 2021 KiwiSaver Report
As we can see, choosing the Generate Conservative Fund because of lower fees means missing out on higher returns. Although, conservative funds are historically less risky and less volatile than growth funds. Depending on your circumstances, avoiding volatility may be a priority which can lead to opting for lower returns for the sake of stability.
Now lets take a closer look at different providers offering growth funds, their management fees, and 5-year average annual returns:
|
Providers in Growth Fund |
Management Fees |
5-Year Average Annual Return |
Returns After Fees |
|
ANZ |
1.05% |
11.70% |
10.65% |
|
Booster |
1.24% |
10.90% |
9.66% |
|
Fisher Funds |
2.51% |
12.40% |
9.89% |
|
Generate |
1.42% |
11.90% |
10.48% |
|
Milford |
2.00% |
13.10% |
11.10% |
Source: Morningstar December 2021 KiwiSaver Report
As we can see, Fisher Growth Fund has the highest fees but has been outperformed by the Milford Active Growth Fund with lower management fees.
You can check those Kiwi Saver options and fees through your provider’s KiwiSaver login. However, you can’t compare fees between different providers through your login. For example, an ANZ client can access their account and fee details easily through their ANZ KiwiSaver login. They are not able to check another providers’ fees on the ANZ platform. However, the information is public and is available on each provider’s own website.
Conclusion
To summarise, there are two types of fees commonly used by KiwiSaver providers. All providers aside from Juno KiwiSaver Scheme charge management fees as a percentage of your balance. These fees can range from 0.2% to as high as 2.51% of total assets in a fund, annually. As of December 2021, Milford KiwiSaver Cash Fund had the lowest management fee and Fisher Growth Fund had the highest. These management fees primarily pay for experienced professionals managing funds, navigating volatility intended to generate higher returns on your investment.
In addition to management fees, some providers also charge administration or other fees. These fees range from $0 to as high as $39.96 annually. Providers like ANZ, ASB, BNZ, and Milford charge no administration or other fees. On the other hand, Aon charges $39.96 annually. These fees in particular cover things such as marketing, legal, administrative, and customer service costs.
You also need to let your provider know what your PIR rate is. People fall under one of the following three PIR tax rates; 10.5%, 17.5%, or 28%. When joining KiwiSaver, if you don’t provide your PIR rate, you will automatically fall under the 28% rate. Therefore, it is very important to know and you can find out by using National Capital’s PIR Calculator.
Lastly, you shouldn’t change KiwiSaver scheme and fund based on fees alone. Higher fees don’t guarantee higher returns and neither do lower fees. There are a number of other factors to consider and National Capital can help in this aspect. Fill in our short questionnaire and get your FREE KiwiSaver Recommendations. For up-to-date industry coverage and the best performing KiwiSaver funds, click here.