Kiwi Wealth head of retail, Joe Bishop, has challenged all at-scale KiwiSaver providers to cut fees before government or regulatory intervention forces the issue.
Bishop said there was scope for fee cuts across the KiwiSaver industry particularly among large providers that had piled on funds under management without returning scale benefits to members.
Last week the $4 billion plus Kiwi Wealth slashed the annual fees on its conservative KiwiSaver fund by 17 basis points (bps) to 0.83 per cent with more modest price cuts across the scheme’s balanced and growth options (down 6 and 2 bps to 1.05 per cent and 1.15 per cent, respectively).
Kiwi Wealth also dropped the minimum annual fee from $50 to $40. Rather than charging a monthly administration fee, Kiwi Wealth sets a minimum annual member charge that is absorbed by the annual management fee once account funds reach a certain level.
“We felt we had sufficient scale to lower fees, especially in the conservative fund,” Bishop said. “It was a good time for us to cut fees, and a good time for all KiwiSaver providers to closely examine their fee structures to make sure they reflect fair value for their services.
“And where they can, providers should pass any savings back to members.”
He said the industry should move on fees before government or regulators set the agenda. The seven-yearly default provider appointment process is due this year with Commerce Minister Kris Faafoi promising a strong focus on fees.
“… I have been very clear that we want to see strong competition between KiwiSaver providers and fees going down,” Faafoi said last year.
As part of a wider internal review, Kiwi Wealth also changed the asset allocation settings for its KiwiSaver growth and conservative funds while closing the almost $130 million Cash Plus option to new members.
Following the revamp, the conservative fund potential exposure to equities will move from the current 15 per cent to 30 per cent as at the end of April. Meanwhile, the Kiwi Wealth will dial back the risk a little for the growth fund, bringing the maximum allocation to shares down from 100 per cent to 90 per cent.
“The changes in asset allocation means that the Growth fund will be a slightly less ‘growth’ focussed than it previously was,” Kiwi Wealth told members.
Bishop said the higher risk allocation in the conservative fund should see better long-term returns for members.
“[The conservative fund] can be a long-term proposition for many members,” he said. “So it makes sense to maximise the risk – without going outside the definition of a conservative fund.”
Upping the risk quota for the conservative fund also sets it more clearly apart from the remaining Kiwi Wealth defensive choices: the default and cash funds.
Both growth and conservative fund members have been encouraged to use an online risk-profiling tool, Bishop said, to ensure the new asset allocations remain appropriate for their circumstances.
Ultimately owned by the NZ government, Kiwi Wealth has accrued over 200,000 KiwiSaver members including 31,000 new arrivals over the last year.