Low KiwiSaver fees no guarantee for biggest returns

Analysis of KiwiSaver shows the funds with the lowest fees don't always deliver the best results for investors. Photo/123RF.

Choosing the cheapest KiwiSaver fund will not guarantee you get the most in your pocket, research suggests.

Analysis of the after fees and tax returns from KiwiSaver funds over the 10 years to March 31 found there was no instance where the cheapest 15 per cent of funds appeared in the list of the top 15 per cent of highest returning funds.

There were only three instances indicating an overlap between the 15 per cent cheapest and the 15 per cent highest performing funds when the research was conducted over any five-year period in any of the categories.

Binu Paul, a co-founder of Pocketwise - an independent financial product comparison website which carried out the research, said it showed fees were important but should not be the sole factor used to pick a fund.

"Fees are charged regardless of whether a fund has added value or not and so it is a very important factor to consider.

"But the result of this analysis is a timely reminder for KiwiSavers that fees should be only one aspect of your decision to invest."

Fees have been under the spotlight in recent years with the government introducing legislation to ensure KiwiSaver providers report fees in dollar figures on annual statements this year.

Low-cost non-profit KiwiSaver provider Simplicity also entered the market nearly two years ago on August 2016 challenging rival providers over how much they charge.

Paul said Simplicty was not included in the research because it had only been around for a short time and it was possible that the results could change over time.

But rather than focusing solely on fees he urged people to figure out which type of fund was best for them and then compare the funds within the category by looking for the most consistent performer.

KiwiSaver was launched in July 2007 and has 2.8 million members with close to $50 billion invested.