Simplicity starts year with a fee cut

Simplicity is cutting fees for all of its KiwiSaver and diversified investment funds by 13.8%, from 0.29% to 0.25%. The changes kick in on February 1 and this is the manager's sixth fee cut in six years.

"We first cut fees in 2018 when the annual member fee for investors under the age of 18 was removed, and the following year moved to a single member fee regardless of the number of funds held by an investor," managing director Sam Stubbs says.

"In 2020 the membership fee was reduced by $10, and this fee was eliminated for all members in December 2021. More recently, in 2023, the investment management fee was cut to 0.30% and then further reduced to 0.29% after a switch from Vanguard to DWS International GmbH (DWS) reduced our management and administration costs for existing diversified funds."

This latest fee cut is the result of Simplicity's continued growth, with more than 147,000 members and $5.5 billion dollars in funds under management.

Stubbs, is highly critical of industry KiwiSaver fees. "Too many fund managers are getting fat on the fees ordinary New Zealanders pay,” he said.

The FMA KiwiSaver Annual Report 2023 shows industry fees for the year were $664.1 million.

“Managing a KiwiSaver scheme requires no regulatory capital, and has massive economies of scale. Very little of this gets passed on to members,” he said.

From February 1, Simplicity will charge management fees 0.25% annually for all their KiwiSaver Funds.

In contrast, the Sorted website indicates that the current average fee charged for $10,000 invested in KiwiSaver is 1.21% for growth funds, 1.03% for balanced funds and 0.90% for conservative funds.

“That gives you an idea of the gravy train of fees,” Stubbs says.

“Imagine if a for-profit health insurer tried to charge four times what Southern Cross does? How long would they stay in business?” he asked.

“Yet that’s what’s happening with KiwiSaver every day, as fund managers cash in on the lack of awareness of ordinary New Zealanders saving for their retirement,” he said.