Wednesday 5th October 2016
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KiwiSaver investment management fees climbed 28 percent 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 $172 million a year earlier, with fees on active schemes climbing by almost a third to $202 million, the Financial Markets Authority's annual KiwiSaver report shows. That was more than the 19 percent expansion in funds under management to $33.8 billion as at March 31, and came as investment returns shrank to $1.3 billion in the year from $3 billion in 2015.
The increase in management fees coincided with fewer KiwiSaver members sticking in the default schemes, with their share of assets shrinking to 12 percent from 14 percent a year earlier. KiwiSaver membership rose to 4.8 percent to 2.6 million in the year, and about 30,000 members with $405 million 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 percent to $176.3 million, administration fees up 5.8 percent to $77.8 million and trustee fees down 3.5 percent to $5.5 million. Other scheme costs rose 31 percent to $23.1 million.
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 percent of funds under management in 2016, unchanged from 2015, while default fees fell to about 0.7 percent from 0.8 percent.
In a separate statement, 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" and that the Ministry of Business, Innovation and Employment, FMA and Commission for Financial Capability were reviewing the content of those reports.
"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."
Member contributions to KiwiSaver schemes climbed 10 percent to $2.6 billion and employer contributions rose 9.6 percent to $1.6 billion, while Crown contributions shrank 21 percent to $728.3 million with the end of the $1,000 kickstart for new members.
Withdrawals jumped 56 percent to $1.16 billion, with first-home purchase withdrawals more than doubling to $495.6 million.
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