Many New Zealand households have had a close eye on costs in recent years.

While you might have been watching your supermarket receipt or your power bill, have you thought about your KiwiSaver savings?

KiwiSaver fees can make a big difference over a person’s investing lifetime, but it’s not always a case of cheapest being best.

Here are a few things to know.

The main types of fees

You may pay a few different types of fees. Most people are charged a member fee, which is a set amount paid monthly or annually. Then there is a management fee, which is usually expressed as a percentage of your total balance. This can range from anything from about 0.2 percent through to more than 2.5 percent per annum.

It is rare for KiwiSaver providers to charge performance fees, which are a reward for managers, often for achieving a higher level of return than the target. Sometimes though, KiwiSaver funds may invest in underlying managers who charge them.

You’ll be able to see the fees you’re paying in the transaction history of your KiwiSaver account or on your statements.

Why fees matter

As with a lot of things when it comes to a long-term investment like KiwiSaver, fees matter because they can make a big difference over time.

In the same way the returns compound to create better outcomes over longer periods of time, the effect of fees being deducted can compound over many years.

Fees are also important because they are charged regardless of market performance. You can’t be sure what return you are going to get from your fund, but you can rely on the fact that the manager will charge you the fees that they have outlined (although their fees may change over the course of your investment).

Cheapest is not always best

Everyone loves a bargain, but when it comes to KiwiSaver what’s most important is usually what you are getting for your money.

You may think it’s worth paying a little more for a fund that is consistently delivering very good performance compared to its peer group. Past performance is no guarantee of what will happen in the future, but you may be able to see trends.

Conservative funds tend to have lower fees than higher risk funds but are likely to offer lower returns over the long term.

In some cases, fund managers may charge additional or higher fees because they offer additional services which can help your overall outcome, too.

When you’re comparing fees, think about what is important to you and the value the funds can offer. If you’re not sure what you’re getting for your fee, you can ask your provider directly.

How to check and compare fees

There are a few ways you can check how funds measure up.

Sorted offers its KiwiSaver Fund Finder, which is a searchable database of funds and fees and can help you track your options.

Morningstar also issues a quarterly KiwiSaver survey, which shows how each fund is performing in its category.

It’s usually most helpful to look at returns over a long period because short term market movements, or temporary investment decisions, can create blips in performance.

We can also help

The SHARE team of investment experts can also help you to look at which KiwiSaver providers and funds may be suitable for your situation and objectives. We can help you consider your goals and your investment strategy and help you with a plan that works for you.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.