New research shows KiwiSaver fees are lower, as a median, than those of Australia, despite the scheme being a fraction of the size.

The research was prepared by Deloitte, for Generate.

It found that KiwiSaver’s median total fee of 0.77 percent was slightly below Australia’s 0.79 percent despite Australia’s superannuation scheme being about 35 times larger.

The United Kingdom has the cheapest system, with a median fee of 0.32 percent.

The report said KiwiSaver default fees were comparable to those of Australian default funds and slightly above UK default funds.

Higher allocations to growth assets generally aligned with higher total fees. Active funds tended to charge more than hybrid or passive funds.

New Zealanders were paying more for non-default fund options, however.

KiwiSaver default funds had a median fee of 0.25 percent, compared to 0.85 percent for other options. Default and non-default options in the UK were similar. In Australia, default funds had a higher median.

Greg Smith, investment specialist at Generate, said the difference between default and non-default fund fees was driven by policy and product design.

“Default funds have been engineered to be low cost. Non-default funds have been engineered to provide choice, and span a much wider range of investment approaches, including higher growth allocations and active management, which can result in higher fees.

“However, fees are only one side of the equation. The key question isn't simply which fund has the lowest fee, but which delivers the strongest net returns after fees over the long term,” he said.

“The focus on fees is understandable, but investors retire on net returns after fees, not fee levels. That's why it's important to look at long-term outcomes and consistency of returns alongside cost. A slightly higher fee can be worthwhile if it is accompanied by stronger and more consistent long-term net performance. While default funds have succeeded in driving fees down many non-default funds have built track records of delivering consistent long-term outcomes. That's why fees should be viewed as a means to an end, not the end itself.”

Ana-Marie Lockyer, chief executive of Pie Funds, said it was a little surprising that overall New Zealand funds were cheaper.

“But it’s also a positive sign for KiwiSaver. Scale matters, but it isn’t the only driver of fees — competition, fund structures, investment approaches and regulatory requirements all play a part.  What matters most for members is value for money rather than fees in isolation. A low fee is obviously attractive, but ultimately members should be looking at returns after fees and what they receive after fees — including long-term investment performance, service and advice where that is part of the proposition.”

Koura founder Rupert Carlyon said it showed that the costs of managing KiwiSaver and other superannuation schemes was higher than people thought.

“If we want to give people innovative, interesting KiwiSaver options …we have to be allowed to charge for that.”

He said some of the difference would be due to the private assets that many Australian superannuation funds were invested in.

“Private assets cost money…. If you want the best investment specialists looking after certain parts of a portfolio, you need money to pay for that. And that's why the Australians are pretty good.”

He said it might be time for the industry to move on from the fees conversation.

“We saw from the research from Simplicity a couple of weeks ago that there is no relationship between fees and returns… our KiwiSaver scheme is not overly bad value for money when you compare it to Australia's. It's kind of like, when are we just going to stop talking about it?’

The research showed that between the last update in 2024 and this year, Australia’s default fees fell from a median 1.06 percent to 0.87 percent. The UK’s fell from 0.41 percent to 0.3 percent while New Zealand’s held steady.

The median of funds for which members were making an active choice also moved in the same way. Australia’s median fell from 0.96 percent to 0.77 percent, the UK’s fell from 0.47 percent to 0.32 percent and New Zealand’s median was stable, only moving from 0.86 percent to 0.85 percent.

“Fee ranges widened in Australia and the UK for default products, and in Australia and New Zealand for choice products — in Australia's case at both ends, with the cheapest default falling to 0.3 percent while the most expensive choice option rose to 2.33 percent. The UK choice range narrowed, and New Zealand's default distribution was unchanged from 2024 across its entire spread.”