A follow-up comparison study of Australian, NZ and UK pension funds has found KiwiSaver remains a no-scale but low-fee destination.
The 2024 Deloitte Australia pension fund fees benchmarking report – sponsored by Generate – shows size appears to have little influence on costs across schemes analysed in all three jurisdictions.
According to the report: “Increased scale as defined by Funds Under Management (FUM) was observed to have a weak relationship with a reduction in total fees paid by the member within the Australian and UK peer groups.
“Due to the lower average fees and significantly lower FUM that characterises the New Zealand peergroup, no meaningful benefits of scale are observed compared to the other systems.”
Instead, the report, which builds on an inaugural 2022 study, suggests pension fund costs are largely determined by asset allocation, investment style (passive, active or a hybrid of the two) and system design.
Deloitte found more than 70 per cent of both default and ‘choice’ Australian superannuation funds charge dollar-based fees (in addition to asset-linked investment charges) compared to just 29 per cent of KiwiSaver schemes and just 17 per cent of UK pension funds in their respective non-default options.
“The higher and frequent dollar-based fees may indicate relatively higher administration costs per member in the Australian system irrespective of assets and investment management,” the report says.
On average, KiwiSaver has lower default fees than both the Australian and UK pension schemes covered in the study.
UK non-default funds came out slightly cheaper overall than both NZ and Australian counterparts. All UK-based funds also saw the largest price drops since the 2022 study. However, Generate chief, Henry Tongue, said the 2024 analysis excluded some UK funds at both extremes of the cost range that were in the earlier sample.
“Default options across all systems had a reduction in fees relative to 2022 levels,” the report says. “Ranges for all systems narrowed relative to 2022, which can be attributed to increased homogeneity within the peer group.”
Overall, Tongue said the 2024 update confirms the $110 billion or KiwiSaver as a low-cost pension scheme on a like-for-like basis, particularly when weighed against the almost A$4 trillion Australian super system.
“When comparing options with similar management styles and growth asset allocations, total fees are similar between the Australian and New Zealand peer groups,” the report says.
“We consider this to indicate that variations in fees across the systems considered are primarily due to product design, with further secondary impacts from system complexity. This shows KiwiSaver fees to be highly competitive in relation to their much larger scale Australian and UK peers.”