Australian research house Canstar has conducted a comparison of 29 KiwiSaver Schemes and 91 KiwiSaver Funds and determined just 7 schemes offered the best value for money based on their rating criteria and methodology.
The research covers three KiwiSaver risk profiles namely Conservative, Balanced and Growth so does not cover the full spectrum of KiwiSaver Funds available in the market place.
It covers results to June 2013.
This is essentially a benchmarking of fee levels. It is not a review of fund or Scheme performance.
The seven Schemes ranked as offering best value for money are: ASB, SuperLife, SmartShares, Tower (recently acquired by Fisher Funds), AMP, Medical Securities and BNZ.
Here are Canstar's comments on each Scheme provider highlighted above.
- ASB holds five-stars in all profiles for the third time running. Trustee and expense fees are absorbed into one simple management fee which is highly competitive against all their peers. In terms of features, ASB provide members with the convenience to apply online and check their fund balance through their mobile application as well as educational material through their website and on YouTube such as importance of contributions and market overviews.
- SuperLife has also held onto five-star rating in the balanced and growth category for the third year running. They have a low fee structure and a full range of online educational resources to teach members on investing and the importance of low fees. Their website is easily navigable and in addition to general information offers online calculators and quarterly newsletters. They also run regular seminars for the public.
- Smartshares has received a five-star in the balanced profile due to their competitive fee structure. Their all-inclusive management fee absorbs trustee and expense fees and they do not charge a member fee. Their website is easy to navigate and able to help you find your ideal KiwiSaver plan depending on a few simple questions. You are also able to access your account online and view current account balance.
- TOWER’s Cash Enhanced Fund has received five-stars this year in our Conservative profile. As a default fund (albeit one that cannot be enrolled into by the public), they are the second cheapest fund in the conservative profile. Feature-wise, all scheme-based information such as fund information and historical annual reports are obtainable online and you are able to have access to financial advisors to help plan for retirement.
- AMP’s Default Fund is another new five-star product within our Conservative profile. Current members enrolled in this fund (unfortunately kiwis also cannot enroll into this fund) can be assured of a low fee and access to a large range of investment fund options should they want to switch up to another fund which suits their appetite for risk and further growth for their retirement.
- Medical Assurance’s Growth and Aggressive fund has made an appearance in this year’s Growth profile due to their competitive fee structure. An all-encompassing management fee at 1% (with minimum $50 flat fee) and trustee fee provides certainty of cost for members. All general information is provided on their website and support from advisors to help plan for you retirement.
- BNZ’s first time in the ratings has resulted in their first 5 star rating in the conservative profile. Their low member fee contributes to an overall competitive fee structure at $2 per month. Members are able to apply online as well as access to internet banking facilities and the ability to convert fly by points to contributions are always a plus when you want to boost your retirement savings.
To come up with these results Canstar assessed the pricing and features of each scheme and fund. More details on this assessment criteria can be found here.
In summary the pricing score Canstar comes up with considers the annual cost to members and take into account account five different fees. The pricing score is then combined with over 80 product features across five different categories for each scheme to determine who provides the best value funds. The pricing score weight towards the overall score is 70% and features accounts for the balance of 30%.
Canstar in their report stress the ratings they come up with for each scheme or fund is not based on performance.
They prefer to focus on fees which are known and have an impact on the net returns received by the investor. Further rating methodology can be found in the report.
However, the comparison landscape is changing, and may undercut this Canstar report.
Investors should also keep an eye out for the new reports coming out under the KiwiSaver (Periodic Disclosure) Regulations which came into force on 1 July.
This new method of standardised reporting should make it simpler to compare KiwiSaver Schemes on an apples with apples basis. The new reporting will also include a Total Expense Ratio (TER) calculation which will show the percentage of fees taken by the Scheme over that financial year.
While we agree that fees and the relative value offered to investors is a valid consideration, it is not the only factor that should determine an investment decision.
Should investors not also consider performance in relation to the amount of fees they are paying? There are instances where funds with higher fee structures are providing investors with superior returns.
Investors should also look at risk adjusted returns and not just the headline numbers. Some managers may be taking on considerable risk to generate higher returns and others may not be adequately rewarding investors.
Note that the BNZ Scheme has been running for less than 12-months and does not have sufficient track record to justify including it in our comparison tables.
More information on the various KiwiSaver Schemes, fees, features, performance data and fund reviews can be found in our KiwiSaver section here.