By Frank Newman on 13th June 2017
A low-cost KiwiSaver provider called Simplicity is offering something new to the KiwiSaver scene: low fees and ethical investing (its investments exclude tobacco, landmines, cluster bombs and nuclear weapons!).
Their website (simplicity.kiwi) states the fees are $30 a year plus $3.10 for every $1,000 in an investor’s account (0.31%), for all of their fund types. That compares to fees that typically average between 1.07% for conservative funds to 1.45% for growth funds. Their promise is to keep their fee to at least 50% less than the industry fee average, and to continually lower fees over time as the fund grows.
According to Simplicity, a person making a $50,000 investment would be better off by $13,000 after 10 years as a result of the lower fees. That’s very significant when taken over a lifetime of saving.
While ethical investing is not new to New Zealand (and has gained little traction it has to be said) the low-fee message seems to be resonating. Since August last year they have gained just over 5500 members and have over $100 million under funds management.
No doubt other managed funds will argue that actual performance is more important than fees. They are of course right. The test will be whether Simplicity can achieve returns at least as good as the other high fee paying funds, but at this stage there is no reason to assume their returns will be lower, as their investment approach is quite typical.
Here are some interesting facts and figures about KiwiSaver:
• As at March 2017, the total value of KiwiSaver funds under management is was $38.8 billion.
• The six largest KiwiSaver providers currently have over 85% of market share.
• About 55% of the funds are invested in fixed interest securities, 40% in shares and 5% in property. 52% are in overseas investments.
• ANZ has the largest market share with $10 billion under management. ASB is the second largest at $7.1 billion.
• In the year to the end of March 2016, 175,000 members switched from one KiwiSaver provider to another. The amount switched was just over $2 billion.
If you want to learn more about the performance of KiwiSaver funds, have a look at http://fundfinder.sorted.org.nz.