When it comes to choosing your KiwiSaver provider, fees are one of the key factors to consider. Why? Because costs matter: as small as they might be, they can significantly affect your final balance over time.
That said, it’s also important to select a KiwiSaver provider based on more than fees alone. So, here are some key things to think about.
Understand KiwiSaver fees
From account membership to management, performance, and administrative fees, KiwiSaver providers may charge an array of fees. These can either be a fixed charge or a percentage of your balance.
Fees often depend on whether the fund is active or passive. Passive funds track a particular market index without frequent adjustments, hence operating at a lower cost. On the other hand, active funds involve a more hands-on approach with professionals constantly tweaking the investment mix in an attempt to surpass market index returns. This active management can come at a premium.
Since every provider has its distinct fee structure, it becomes paramount to monitor and understand these charges. But chasing the lowest fee might not always yield the best results.
Look at the returns after fees
While a low-fee fund might seem attractive at first, it’s more important to look at the net returns (after deducting all fees and tax), as despite lower fees, they may not deliver the same returns. If you delve into historical data, for example, you might find that some high-fee funds consistently outperform their low-fee counterparts in terms of after-fee returns.
So, make sure you analyse performance from a holistic point-of-view, while also keeping in mind that past results are not a guarantee of future outcomes.
What services are you getting?
It’s worth noting that the discrepancy in fees between providers is not arbitrary. Often, higher fees indicate added services. So, besides return-after-fees, you may also want to assess the services you’re getting from your KiwiSaver provider.
In other words – evaluate your provider based on value for money. In the KiwiSaver context, ‘value’ might be in the form of financial advice, fund types, or ethical investing propositions.
Keep your goals and values top-of-mind
While fees are a crucial aspect, it’s important that they don’t overshadow other crucial factors. At the end of the day, the most appropriate KiwiSaver fund for you is one that aligns with your financial goals and personal values. So, always think about what matters most to you.
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If you have any KiwiSaver-related questions, please don’t hesitate to contact us. You can call us on 0800 800 400, start a Live Chat or fill in this form to get in touch.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.
