Financial service provider AMP has cut its KiwiSaver fees. Photo / 123RF
Financial service provider AMP has cut its KiwiSaver fees. Photo / 123RF
AMP has slashed the fees on 11 of its KiwiSaver funds to a flat 0.79 per cent of funds under management - the second major provider to cut its fees in the last month.
The financial services provider confirmed the fee change as part of its half year results releasedThursday morning.
The New Zealand business - AMP Wealth Management - made a net profit after tax of $21 million for the six months to June 30 - an increase of 11 per cent on the same prior period.
Its assets under management rose 9 per cent to $13.4 billion although the company saw a net cash outflow of $257m during the half compared to net cash inflows of $21m in the first half of 2020, a factor it has put down to a heightened competitive environment.
Blair Vernon, chief executive of AMP Wealth Management New Zealand, said the result reflected a solid performance as it continued to renovate its business.
In October last year it announced it would ditch an active management approach in its managed funds including KiwiSaver in favour of using global index-tracking investment manager BlackRock.
The passive index tracking approach is much cheaper for fund managers to use as it relies on technology to track an index like the NZX50 rather than a stock picking approach which is heavily research intensive.
An AMP spokesman said the fee changes, which came into effect on July 12, had been made as part of a broader transformation of its investment offer, which also included adopting a sustainable investment approach across all AMP named funds and a move to an index management investment approach to deliver stronger returns.
"Our transition to this approach with the support of BlackRock Investment Management will ensure we continue to enhance further value for money for our clients."
AMP is one of the largest KiwiSaver providers with around $6.57 billion putting it as the fifth largest, according to Morningstar data. But its investment returns have previously lagged the market.
Blair Vernon, chief executive of AMP Wealth Management New Zealand. Photo / File
In May it was also one of five providers to lose its default provider status which means from December all members of its default fund will be shifted to the newly appointed default providers unless they actively decide to stay with AMP.
A large factor in deciding who gained appointment as a new default provider was fees with the government aiming to bring the cost of KiwiSaver down.
Regulator the Financial Markets Authority also told providers in April they must review their fees annually and prove they are providing value for money or face potential regulatory action.
Last month Westpac said it would remove its $12 admin fee and cut its fund fees by between 4 and 26 basis points by the end of September.
AMP has now rolled its management and admin fee into the 0.79 per cent fund charge. It will still charge a monthly member fee of $1.95.
The biggest cost saving will be for members of its AMP Balanced Fund No2 which previously had a fee of 1.35 per cent. Its conservative fund previously charged 1pc, its balanced fund 1.17 per cent and its growth fund 1.18pc.
AMP's current default fund fee will remain at 0.39 per cent while its cash fund will also stay at 0.59 per cent.
Typically providers charge a higher percentage fee for growth and aggressive funds compared to lower risk balanced and conservative funds due to lower allocations to shares.
But an AMP spokesman said it decided to use the flat fee structure to simplify investing for clients, who can now focus on choosing a fund or funds based on their risk tolerance and savings goals – rather than the price of the fund.
"Our investment approach and scale allows us to make this simplification available to our AMP KiwiSaver Scheme clients."
KiwiSaver funds run by other providers but accessible through AMP's KiwiSaver scheme will not have the flat fee.
