KEY POINTS:
KiwiSaver providers are lining up a bewildering menu of options for savers, with a range of prices to match.
Twelve providers have been registered by the Government Actuary, and the industry expects about 30 to be in the market when the scheme starts on July 1.
Most are likely to have options ranging from conservative funds weighted towards keeping the money in the bank to "growth funds" investing in riskier shares and property.
Annual fees will range from a low of 0.25 per cent up to a maximum of 1.515 per cent of the money invested, plus various add-ons.
Some of the lowest fees will be charged by the six "default" funds, which cannot have more than 20 per cent of their money in shares and property. All savers who do not choose another fund will be allocated randomly to one of the default funds.
At the other end of the scale, growth funds will charge fees of 0.8 to 1.2 per cent a year - and dangle the prospect of higher returns to match.
The highest quoted fee is 1.515 per cent of the funds invested, plus add-ons, for Westpac's proposed "capital protection fund", which guarantees that your savings can't fall below what you put in at the start of each 10-year period.
All providers except the Gareth Morgan KiwiSaver scheme include an add-on administration charge ranging from $24 to $60 a year.
Mr Morgan will charge a minimum of $50 a year or a flat 1 per cent, which he says will include all charges except costs passed on by the scheme's trustee.
"One of the issues [in other schemes] is all the costs involved, not just the fees but the expenses," he said. "It's like going to your solicitor and he charges you for the most expensive photocopying service you've ever known."
Finance Minister Michael Cullen said yesterday that the default providers' fees were "quite low" compared with other managed funds.
Other questions from Herald readers:
Q. I was employed, and therefore would have been entitled to employer contributions, but I had a bad accident and am permanently disabled. My income comes from several small contracts and is made up to 80 per cent of my previous earnings by ACC. Presumably I won't get employer contributions for the income I earn from contracts? Does ACC take over the role of employer and contribute in the same way? Would I get employer contributions from ACC?
A. You won't get any contributions from ACC. It says: "ACC is not an 'employer' in the usual sense for recipients of weekly compensation, and this is reflected in the KiwiSaver Act, which excludes ACC and some other Government agencies from making KiwiSaver contributions on behalf of the people they support. But some employers may supplement their employees' contributions with these additional payments."
Because you have some income from contract work, it will be worth opening a KiwiSaver account to get the Government's $1000 kickstart and subsidy matching whatever you can contribute up to $20 a week.
If you do your contract work on a self-employed basis, you won't get any matching contribution from the companies you work for.
But if you do your contract work as an employee and pay 4 per cent or 8 per cent of these earnings into KiwiSaver, your employers will have to pay in 4 per cent too (from 2011).
Q. If you are currently in a superannuation scheme run through your company and you want to change to KiwiSaver or you leave your company, can the amount accumulated be converted to a KiwiSaver super scheme so we are not tempted to spend it too early? If this is possible what interest will it earn?
A. Your company is unlikely to invest your money into KiwiSaver for you when you leave. It will pay you the money and you will have to invest it in KiwiSaver yourself. The earnings will depend on which fund you choose.
Q. As a 30-year-old, if I put in enough to retire with $300,000 in 35 years, how far is $300,000 going to go? One could expect that there would be quite easily 150 per cent inflation over that time, making $300,000 seem quite light to retire on. Would I still get Government super as well as KiwiSaver?
A. The figure of $300,000 at age 65 is a Treasury calculation for a low-income 30-year-old couple earning $22,500 a year each who both pay 4 per cent of their wages into KiwiSaver until age 65.
The $300,000 is in "today's dollars". This means that any amount you pay or receive in the future will have the same buying power as this many dollars today.
The calculation assumes that your KiwiSaver fund earns a real net return, after inflation, fees and tax, of 2.5 per cent a year.
You can work out how much money you would get yourself, based on the same assumptions, at: www.sorted.org.nz/calculators/kiwisaver-quick-calc/
