Getting your kiwisaver sorted is one of the most crucial aspects of your personal finance for Kiwis. I’ve previously written about different aspects of Kiwisaver- about some of the myths around kiwisaver, and the downsides of kiwisaver. But, I’ve never really looked into some kiwisaver providers.
The default funds that you are automatically enrolled in once you sign up usually don’t align with your investment strategy, ethics, or risk tolerance. And you might be leaving thousands on the table of lost interest and extra fees.
Thankfully, the government also agrees that you need to make the right choice for you and have provided you with a resource. You can go to Sorted.org.nz to help you figure out what fund is right for you. Sorted is a free service powered by CFFC (Commission for Financial Capability). There you can compare your current fund and check out other funds that are available.
I did exactly that- since I have been with ANZ over the last year and knew the fees were quite high compared to what else was on offer- but being the human I am, I always put off really looking into the other options.
So let’s review the kiwisaver providers that are often recommended because they have far lower fees than the majority of kiwisaver providers. That is Simplicity, Juno, and Superlife kiwisaver schemes.
Simplicity is a not-for-profit kiwisaver scheme that aims to provide kiwis with the lowest fees around. They are 100% online and they give 15% of there fee to go to the Simplicity Charitable Trust, which supports other kiwi charities.
They also believe in ethical investing. They have no investments in fossil fuel extraction, tobacco, weapons, landmines, alcohol, nuclear energy, adult entertainment and gambling.
Simplicity started in 2016 and now have 27,000 members with 970 million under management. In 2018 it was reported that the Simplicity growth fund outperformed all other KiwiSaver growth funds in the six months prior.
Funds offered by Simplicity
Simplicity offers four different funds, Conservative, Balanced, Growth, and Guaranteed Income fund. Each of the funds is made up of over 3000 different interments in 23 countries. So they are well diversified. Each fund is made up of international shares, international fixed interest, NZ shares, NZ fixed interest, Australian shares and cash.
As you can see the conservative fund investments largely in fixed-income (78%) and cash (2%), with the remaining in 20% in the sharemarket with most of the risk in overseas shares. Based on this, most of the fund’s return can be predicted year-on-year and this is the less risky Simplicity they fund currently offer.
The balanced fund is a hybrid between the conservative fund and the growth fund, offering a midway point for someone looking for higher returns without high risk. The fund is 56% shares and 44% fixed income.
The growth fund is the most aggressive fund Simplicity offers, with 86% in shares in International and New Zealand. The return and value of this fund will depend heavily on how international sharemarkets are performing, and as such, you can expect higher returns with higher risk.
The Guaranteed income fund is something I don’t see with many Kiwisaver providers. The fund aims to pay investors 5% of the funds per year at age 65 for the rest of their life after tax and fees. Basically, it tries to use the 4% rule often talked about in the fire community.
All simplicity funds have a membership fee of $30 a year, plus a fund management fee of 0.30%.
Superlife is managed by Smartshares, which is in turn owned by the New Zealand Stock Exchange.
Superlife is the only kiwisaver in New Zealand that offers both low fees and a broad range of investments- 38 to be specific. They believe that taking a passive investment approach will deliver a better long term result than actively investing.
Superlife is unique to the kiwisaver providers in giving you the option to manage your Kiwisaver by combining whichever funds you like. With the huge range of investment option available to you with varying degrees of risk and sectors, including kiwi companies, global companies, emerging markets, mining, property, bonds, and government debt, you can arrange your Kiwisaver however you like.
Funds offered by Superlife
SuperLife offers 38 KiwiSaver funds, these invest in a range of index funds offered by a company owned by the NZX. The funds sit in three main categories – Managed Funds (6), Sector Funds (11) and ETF Funds (23). The 23 ETF funds invest directly in their corresponding Smartshares fund.
You can combine as many of these options, in any way you choose, and change them at any time, free of charge. If you know and use InvestNow, think of SuperLife as the InvestNow of KiwiSaver.
If selecting individual funds isn’t your thing then Superlife also offers several complete kiwisaver funds called Ethica, Income, Conservative, Balanced, Groth, and High Growth.
The SuperLife Income fund invests in income-producing assets, such as company shares that pay dividends. It is designed for investors that want to invest in both New Zealand and international fixed interest assets. The fund has a 0.46% per annum of fund’s net value, and a $12 yearly administration fee.
The Conservative fund invests 70% of its money in income assets such as term deposits and bonds, and 30% in NZ and international shares. SuperLife describes the fund as a conservative investment option. Superlife states “Negative annual returns may occur once in every 7-10 years on average.” The fund has a 0.47% per annum of fund’s net value, and a $12 yearly administration fee.
The Ethica fund invests in a mix of income and growth assets that are socially and ethically responsible – nothing that harms society or the environment will be included. Current investments and sectors that are excluded are those in the areas of gambling, tobacco, alcohol, armaments, pornography and fossil fuel extraction. The fund has a 0.60% per annum of fund’s net value, and a $30 yearly administration fee for Kiwisaver, and $12 for investments outside of Kiwisaver.
The SuperLife Balanced fund is a split between shares and fixed income. It invests 40% in fixed interest and 60% in NZ and international shares. Superlife states that it is designed for investors that want a balanced investment option, safe with an element of bank interest-beating returns. The fund has a 0.50% per annum of fund’s net value, and a $30 yearly administration fee for Kiwisaver, and $12 for investments outside of Kiwisaver
The SuperLife Grothw fund invests in Invests mostly in growth assets, with around 20% of the fund invested in income assets. This fund is designed for investors that want growth in their fund. The fund has a 0.51% per annum of fund’s net value, and a $30 yearly administration fee for Kiwisaver, and $12 for investments outside of Kiwisaver
SuperLife High Growth fund invests in growth assets and is designed
for investors wanting an aggressive investment option that invests in shares and property globally. The fund has a 0.63% per annum of fund’s net value, and a $30 yearly administration fee for Kiwisaver, and $12 for investments outside of Kiwisaver
They also offer an investment option called Age Steps in case you don’t want to choose your mix of individual indexes or any of the above-diversified funds.
I personally have a soft spot for Juno methodology after listening to the NZ investor podcast featuring the founder. They have a unique philosophy regarding how to deal with financial crises and recession- and how there is money to be made when these occur.
Juno is part of Pie Funds management limited and launched in 2018- so they’re fairly new. They actively managed their fund supported by traders and analysts. This means that they don’t follow or recreate a benchmark of a sharemarket index- as what Simplicity and Superlife does.
Pie Funds’ investment managers, who run the JUNO KiwiSaver scheme, try to regularly pick undervalued equities in anticipating that their share price will go up in the short to medium term. This has more risk but also has the potential for greater returns.
Juno claims not to be disrupting the Kiwisaver market, rather they are creating a new one.
The named JUNO is quite interesting, it comes from the ancient ‘protectress of funds’ – Juno Moneta. It was in her temple that Roman coins were minted, and it’s from her surname that we now have words like ‘money’ and ‘monetary’ in the English language.
Funds offered by Juno
Juno offers three fund types, Conservative, Balanced, and Growth fund. Since they are not indexed to anything its hard to say specifically what they are made up of at any one time- but all the funds are a combination of shares, fixed interest, and cash.
The JUNO Conservative fund aims to preserve capital, with some growth in the 2-5% annually after fees range. As with all conservative funds, it’s most suited for KiwiSaver who have a short timeframe to invest or aren’t comfortable with risk. 25-10-65% split between shares, fixed interest and cash.
The JUNO Balanced fund aims to prove a steady growth of capital in the range of 5-10% annually after fees and tax. The balanced fund is aimed for investors with a medium to a long-term time frame of 5 to 10 years. 60-20-20% split between shares, fixed interest, and cash.
The JUNO Growth fund aims to provide capital growth averaging over 10% or more after fees and tax. This fund is aimed for KiwiSaver with 10 year plus timeframes who are comfortable with investing. 80-20% split between shares and cash.
All Juno funds have a subscription-based fee rather than a percentage under management fee. It’s free for under $5000- then $5 per month between $5000-$24900. $15 per month on $25000 to $49000. $25 per month for between $50000 to $99999. And if you are above $100000 in kiwisaver it’s a flat $50 per month.
With Juno only having launched in August 2018, there won’t be annual performance data until august of 2019. They are currently sitting at 8.84% since inception and 16.10% for the last six months for their growth fund.
The three funds don’t offer extensive diversity compared to other providers. Juno- They also tend to hold significantly more cash on hand for any investment opportunities that appear. And when the financial outlook gets worst their philosophy is to hold more cash until the outlook turns, in which case they aim to buy investments at the bottom of the market, rather than riding out the market as with index fund providers.
All three of the JUNO KiwiSaver funds invest in shares, and many of these shares will pay dividends. Juno re-invested all dividends into more shares, growing the value of your fund. Despite being a cash payment, and as is the case with ALL KiwiSaver funds, there is no option to take this money as cash until you turn 65.
Current Kiwisaver Fund
My current kiwisaver fund is the ANZ growth kiwisaver. The ANZ kiwisaver scheme is the largest in the country- with nearly 6 billion of kiwis money. The growth fund has been doing fairly well recently. Below is how it allocates its assets
Kiwisaver Fee Comparison
Although Kiwisaver funds normally advertised at a certain percentage as a fee, you have to add in the membership fee as well to get the true fee charged on your investment. I compared the fees for the growth funds, taking the membership into account, charged by Simplicity, Superlife, Juno, and my current ANZ fund for different kiwisaver balances.
|$5000||$45.50 (0.91%)||$60.50 (1.21%)||$60.00 (1.20%)||$79.00 (1.58%)|
|$15000||$76.50 (0.51%)||$121.50 (0.81%)||$60.00 (0.40%)||$189.00 (1.26%)|
|$40,000||$156.00 (0.39%)||$276.00 (0.69%)||$180.00 (0.45%)||$464.00 (1.16%)|
|$100,000||$340.00 (0.34%)||$640.00 (0.64%)||$600.00 (0.60%)||$1120.00 (1.12%)|
- Simplicity growth has a 0.31% total investment fee plus a $30 membership fee
- SuperLife 80 has a 0.61% total investment fee plus a $30 membership fee
- Juno has a usual structure- charging a monthly fee depending on the size of your balance.
- ANZ Growth has a 1.10% total investment fee plus a $24 membership fee
Obviously- whichever Kiwisaver provider you want to use is a personal choice- but you have to make it a personal choice. Don’t stick with the default provider as you will leave money on the table. Sticking with the default provider may not help you achieve financial independence in the long term.
What I’m looking for in a Kiwisaver provider is one that has low fees, preferably passive, and offers an aggressive growth fund- I’m still fairly young- at least I keep telling myself that. For these reasons, I think Simplicity is the best for me.
Your Kiwisaver will be invested for decades- so I think passively investing is the best choice. A passive fund is one that will follow the market, without charging you the extra costs of employing fund managers. Not having any fund managers also reduces the chances for those fund managers to incorrectly time the market.
As far as I can tell Simplicity is the only provider that currently offers this right now.
Juno may be slightly cheaper when your balance gets large (+$200,000), but their active management philosophy doesn’t sit well for me with my kiwisaver- it has to be there in retirement. I’d be much more comfortable with investing money outside of kiwisaver with Pie funds rather than my kiwisaver if you subscribe to the active management beating passive investing.
Superlife looks interesting on the surface- with a wide range of ETFs to select from you can really personalise your kiwisaver. I’m already doing this with InvestNow- and I would like to do it with my kiwisaver- but I think the lower fees offered by simplicity still win.
Check out another one of my post to learn about how long it takes to switch Kiwisaver check.
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