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Low cost, non-profit KiwiSaver provider Simplicity is slashing its management fees and taken a swipe at the high charges in the rest of the industry.
From April 1 it will charge a standard 0.3 percent fee on its conservative, balanced, and growth funds, which is between half and two thirds of the average charged by the sector.
Simplicity's managing director, Sam Stubbs, said it now had the scale to pass on the savings in administration to its members, but is surprised the rest of the industry continued to charge so highly.
"The maths is tragic, because the numbers suggest that as much as 50 percent of KiwiSaver fees, which ordinary New Zealanders pay out of their savings, is either profits for the fund managers, or commissions for financial advisors."
"That suggests potentially $345 million in excess fees last year."
Stubbs said the industry was not required by law to hold capital, and there were economies of scale, which should mean frequent fee cuts, but instead the sector was earning about $1.9m a day in fees and that was feeding excessive profits.
"Too many in the finance industry treat it like a trough of fees, with too few benefits of scale passing back to their members... KiwiSaver managers are on a gravy train."
He said savers need to pressure their managers to cut fees or shift somewhere cheaper, while financial regulators such as the Financial Markets Authority need to pick up their scrutiny of the sector.