How to evaluate KiwiSaver performance
Following the introduction of new legislation, many KiwiSaver members will be seeing the actual dollar cost of KiwiSaver investment fees in their annual statement for the first time this year.
While Mercer KiwiSaver scheme members have been getting fee information in dollars rather than percentages for several years, not all KiwiSaver providers have been so upfront. The new requirements mean their members will finally get a true picture of the fees they’ve been paying.
With all the focus, does this mean fees are the best way to evaluate KiwiSaver performance?
What do I get for my KiwiSaver investment fees?
All KiwiSaver providers charge fees, but the value members get in return can vary hugely. KiwiSaver fees are charged to cover the management and administration costs associated with a KiwiSaver scheme’s funds.
KiwiSaver provider fees are important but they’re not the only thing to think about when reviewing your investment. The services you get and returns you receive are equally, if not more, important.
What services do you get to help you make the most of KiwiSaver?
Not all KiwiSaver providers offer the same services. This includes things like member communications, tools and calculators on the provider’s website and even the ability to talk to someone directly about your retirement savings or how you might make a KiwiSaver first home withdrawal.
Mercer provides a high-level of service, with a comprehensive website and tools like the retirement income simulator and an online portal so you can check balances 24/7. There’s also a call centre who can put you through to one of Mercer’s financial advisers (this doesn’t cost you anything extra) and regular customer communication to help make sure you’re making the most of your KiwiSaver account.
How about returns?
An investment return is the amount of money a fund makes. Net return is the return after fees and tax are deducted. It’s an important number because it puts fees into a performance-related context.
When looking at net returns, New Zealand’s Commission For Financial Capability recommends reviewing performance across at least five years. Short-term returns (like the 12-month return you’ll see in your annual statement) can have big ups and downs.
Mercer KiwiSaver scheme’s default fund has delivered the highest returns of any default fund since KiwiSaver started 10 years ago. In addition, for the last four years the Mercer KiwiSaver scheme has been recognised by SuperRatings for delivering value for money.
The number we think is more important
This year’s annual statement will give Mercer KiwiSaver scheme members a projected balance at age 65 and a calculation around how long that money might last during retirement.
While we’re not required to provide this information, we’ve included it because it allows you to check if you’re on track to meet your savings goals.
After all, won’t it be the amount you may have at retirement (based on your current behaviour and your investment’s performance) that will be the number that matters to you most?