Simplicity KiwiSaver is a 100% online, passively managed index based fund, that’s hoping to save future retirees a bunch of money for sherry and bus tours.
Managing Director Sam Stubbs says Simplicity’s fees will be the lowest in the market, under half the average cost, estimating the average KiwiSaver (over a lifetime of saving) could be $65,000 wealthier in retirement (based on like-for-like comparisons using industry data).
Fees for the average KiwiSaver are currently 1.3% per annum. Simplicity’s fees by contrast will be $30 a year plus 0.30% per annum.
“We have declared war on high KiwiSaver fees", he says, “most New Zealanders don’t even realise the high fees that they are paying. Over their lifetime, the average Kiwi will spend around $36,000 on mobile phone charges, $37,000 on power, but $55,000 on KiwiSaver fees. It could be the biggest household expense that no one knows about.”
Probably not a real quote fro Albert Einstein (still wise words though)
Simplicity is able to charge less due to its nonprofit, online, index investing model. “This is a revolutionary model for New Zealand, already proven overseas, where we only charge people the actual cost of managing their Kiwisaver funds, with no profit margin built in,” Mr Stubbs said.
Simplicity’s launch comes at a time when the KiwiSaver industry, almost a decade old, has come under attack for high fees. According to the Financial Markets Authority, fees paid to KiwiSaver providers totalled more than $1 billion between July 2007 and March 2015. The regulator also noted that KiwiSaver fees are among the top third of OECD countries.
Mr. Stubbs, former CEO of Tower Investments and manager of Tower’s KiwiSaver scheme, says the original intention of KiwiSaver, to provide a low-cost retirement savings vehicle for New Zealanders, had become a gravy train for providers, many of them Australian owned banks.
“New Zealanders deserve more transparency, better online services, and significantly reduced Kiwisaver fees – little of which they are currently getting.” he says.
Two of the directors for Simplicity have previously managed the Westpac and Tower KiwiSaver Schemes, another is former Head of Supervision for the Financial Markets Authority.
Stubbs says lack of education and lack of transparency around KiwiSaver fees meant few people understood how fees work and what kind of impact they have on long-term savings. “It’s time to break down the power that the big KiwiSaver funds have to extract unnecessary fees from New Zealanders, and put that money back into the pockets of hard-working Kiwis.”
Stubbs says Simplicity’s mission, as well as saving people money, is to raise financial literacy levels in New Zealand. He says providers were still not doing enough to educate their members about how KiwiSaver and the investment market works and the impact of high fees.
Simplicity will be available to the public from early September and people are invited to register their interest here.