KiwiSaver can be a gamechanger in helping plan for a comfortable retirement. Over a working life, the average Kiwi has the opportunity to save hundreds of thousands or more towards their “20 year holiday”. This long-term accumulation in wealth is thanks to the combined power of employee, employer and government contributions, plus that beautiful concept we call compounding returns. Yet, understanding what you’re really getting for your money when it comes to your retirement savings scheme isn’t always straightforward.  

The term “value for money” often pops up - and according to Financial Markets Authority (FMA) research, it is one of three key drivers behind typical KiwiSaver decisions. But what does “value for money” actually mean when it comes to choosing a KiwiSaver scheme? Let’s dive into why this is an important concept, and how you can understand and use it to make the most of your retirement savings from the get-go. There’s no time like the present to make sure you’re getting the best bang for your buck!

Value for money isn’t just about finding the lowest fees. It’s about assessing what you get for the level of fees you pay … not just in the obvious sense (appropriate risk-adjusted performance), but also in terms of customer service, communication, and other things of possible value. It can be worth looking beyond just the costs or past performance, to consider the overall value provided by your KiwiSaver provider. Choosing the right KiwiSaver provider and fund can significantly impact whether  your financial nest egg meets your needs later in life. And making that choice based on the things that are important to you also ensures you remain comfortable with your choices, making your KiwiSaver journey simple and effective over the long run.

Let’s look at some key components of value for money when it comes to your KiwiSaver provider and fund:

• Fees: As a low-fee provider, we at Simplicity think fees are a crucial way to help you save more over the long-term. However, when you’re comparing various providers’ or funds’ fees, it can be a good idea to look at what you get for what you pay in fees. For example, Simplicity’s offering is 100% online - we don’t pay advisers, or offer branches where people can talk to us or sign up in person. Of course we’re also a nonprofit, meaning we don’t need to make money for shareholders (although we do pass on 15% of our management fee to the Simplicity Foundation, to fund their charitable giving). This allows us to keep our costs very low, but some people may prefer to pay more for in-person service and access to advice. In this way, “value for money” doesn’t equate to “lowest cost” for everyone. As always, no single investor is the same!
  
  

• Fund management & performance: It can also be worth understanding the impact (if any) of fees on fund performance; you can compare the fees and performance (after fees and taxes) of various KiwiSaver funds on the market using sorted.org’s Smart Investor Tool. Some investors are willing to pay the typically higher fees associated with active management. A fund’s performance after fees, tax and costs could be for some a make or break factor, and this means net performance comes at the top of the value pyramid. An important note to make here though, is that past performance is not an indicator of future performance - it’s just a gauge of how well funds have  done historically. You can find out the performance of most providers’ individual KiwiSaver funds on their website (just check that they’re showing you performance AFTER fees and tax, not before - so you’re comparing apples with apples). At Simplicity, our philosophy is that passive management with lower fees over the long run (aka 10+ years) will be one of the most influential factors on long-term performance, a belief that is backed up by Standard & Poor’s SPIVA studies. This is one of the main reasons we aim to continue lowering our fees as and when we are able to!
  
  

• Customer service and tools: Good service can be worth paying for. Convenient access to your account, comprehensive (and useful!) tools, and responsive/friendly customer support can enhance your investing experience. Like many other providers in the market, Simplicity’s user-friendly online platform offers a simple, straightforward interface for tracking your investments. We also offer a range of tools (such as a retirement calculator and KiwiSaver projection tool) to help our members to better understand and optimise their long-term savings. So before you make your own choices, it can be worth talking to others who are familiar with a  particular provider you’re considering, and understand whether they think that their customer service and platform is good, bad or ugly! We are proud to be Consumer NZ’s top performer when it comes to customer satisfaction* - but there are several other measures that may help you do your own research.
  
  

• Transparency and communication: Knowing what’s happening with your money and how to deal with it in a sensible, smart way can be invaluable. Providers that communicate  clearly around things that are important to their investors can help build trust and confidence, which increase the “value for money” proposition in a slightly less tangible way. For example, does the KiwiSaver provider in question offer regular newsletters, short-form content (such as social posts), podcasts, and/or blogs that explain the things that are important to you? This could be around investment risk and performance, financial education, economic updates or other topics. Again, like the customer service question, it can be worth talking to your friends and family  to understand their perspective around whether a KiwiSaver provider that you’re considering is providing good communication and transparency around their investments.
  
  

• Additional benefits: There are a range of other KiwiSaver provider and fund attributes that may contribute to a specific consumer’s idea of value for money. This could include the provider’s investment approach (Simplicity, for example believing in the low-cost passive approach, vs typically higher cost active managers) or the wider impact of the investments. For example some fund managers also offer ethical investment options or may support local charities or community projects that align with a consumer’s values, thus enhancing their personal perception of value for money.

Value for money in KiwiSaver is about more than just the various fees you pay your provider - it’s about the quality and range of benefits you receive in return for those fees. By understanding and regularly reviewing these aspects, you can maximise your retirement savings effectively. Remember, it’s never too late to reassess your options and switch if you find a better fit!

The information provided and opinions expressed in this post are intended for general guidance only and not personalised to you. These materials do not take into account your particular financial situation or goals and are not financial advice or a recommendation. This post is not intended to convey any guarantees as to the future performance of any of the investment products, asset classes, or capital markets mentioned. Past performance is no guarantee of future performance. Information is current at the time of posting, and subject to change without notice. Simplicity NZ Ltd is the issuer of the Simplicity KiwiSaver Scheme and Investment Funds. For Product Disclosure Statements please visit our website simplicity.kiwi

*The SPIVA Institutional Scorecard results showed that 87.42% of All Large-Cap funds underperformed the S&P 500 over the 10 years to December 31, 2023. For the latest SPIVA Scorecard results for markets around the world, go to  https://www.spglobal.com/spdji/en/research-insights/spiva/. 

**In 2024, Simplicity was a Consumer NZ People’s Choice award winner for the fifth year in a row and ranked first place with an overall customer satisfaction score of 79%. According to Consumer NZ, this was thanks in part to the fairness of its fees and ethical investments. For more information on the 2024 Consumer NZ People's choice awards, go to https://www.consumer.org.nz/articles/consumer-nz-reveals-the-best-and-worst-kiwisaver-providers.