A survey shows some KiwiSaver providers are charging high fees for services they are not delivering.
The Government has canned the $1000 KiwiSaver kickstart programme. Photo: 123RF
An independent report for the Financial Markets Authority looked at the performance of passive and active fund managers, whether they were living up to their claims, and the fees being charged.
It concluded that most providers lived up to their "label" of either actively managing investments to maximise returns, or passively tracking set benchmarks, which requires little intervention, but also found there was little difference in the fees charged regardless of how active or passive a manager was.
"There is no significant relationship between the level of active management employed by providers and the fees they charge," the report said.
"We would have expected to find that the less active providers would have lower fees, on average, than the most active providers."
It found that some KiwiSaver providers who claimed to be active did little to justify that and yet still charged high fees.
"Overall, our results suggest that value for money in some KiwiSaver products is not as high as it could be. With greater competition and scrutiny, we would expect over time to see fees more closely aligned to the investment strategy, and lower KiwiSaver fees overall," the report said.
It also questioned whether investors paid enough attention to the fees they were being charged, and the services being provided.
"The inference we draw is that KiwiSaver investors, on average, are not price sensitive and do not appear to fully appreciate the impact of costs on their returns."
It said moves by the Financial Markets Authority to bring greater transparency to fees and to educate investors had stopped the growth in fees but not changed behaviour, nor had the new low-cost providers.
The Authority's director of regulation, Liam Mason, said he would be talking to KiwiSaver providers seen to be charging high fees for poor services.
"The FMA will produce industry guidance covering expectations around KiwiSaver fees and the statutory requirement for fees not to be unreasonable."
He said providers needed to ensure they met legal obligations to act in the best interests of their members by giving value for money.
"The FMA has regulatory tools available to take action in this space, including consequences under KiwiSaver manager licences," Mason said.