Inside Money: The answer is not 42

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Opinion

In the classic Douglas Adams novel 'The Hitchhikers Guide to the Galaxy' the answer to the "great Question of Life, the Universe and everything" was calculated as 42.

Coincidentally (or is it?), 42 has also been cited as the percentage of KiwiSaver returns that default providers skimmed off members in the 12 months to March 31, 2011.

Shocking, yes, but in common with the Hitchhikers' 42 it is also fictional.

The 42 per cent figure was calculated from the Financial Markets Authority (FMA) 2011 KiwiSaver report based on information provided on page 10 (although I could only make it equal 41).

However, there's a major fault in this method because the bulk of the $20.5 million labeled as "other scheme expenses" is in fact tax, which even in a fictional world would be attributed to the evil empire.

If you assume that all of the 'other expenses' is tax, then the fairer measure of the default providers costs versus returns is 21 per cent - only half as good a story.

(Using the same process, the non-default schemes cost about 17 per cent of returns - or 28 per cent including the tax-heavy 'other expenses' item.)

The revised version chimes better with my analysis of the 42 KiwiSaver providers , which rates the default providers costs per returns as:

• AMP 18 per cent

• ASB 15 per cent

• Axa 18 per cent

• Mercer 28 per cent

• OnePath 16 per cent

• Tower 19 per cent

I have reasons to doubt my Mercer number but the table would be boringly consistent without it.

But if you add up the six default figures, divide by three, then add four you'll get 42.