My new habit of contributing $2 of my own cash to Kiwisaver per week has opened my eyes to the long term cost of tolerating Kiwisaver fees.
Boy, that happened fast. Less than a week in to my new programme of devoting a mere $2 per week from my cash account to Kiwisaver, and I have suddenly become enormously emotionally invested in a growing number of aspects of Kiwisaver management.
At present, roughly 25% of my $2 weekly contribution is going towards service fees on my Kiwisaver account. An even bigger amount is being deducted annually from my Kiwisaver balance in the form of management fees based on a percentage of my net assets under management.
At a compound interest rate of 6.33%, which is equivalent to the average annual return across all Kiwisaver funds, each $2 would over 32 years work out to around $13.40 in retirement savings.
Which means that each time a bank charges you a $2 ‘service’ fee merely for operating an account, they are picking your pocket of $13.40 at a stage of life when you will likely need it the most.
That infuriates me. Lazy bankers are robbing honest Kiwis in their retirement. And it happens all across the country: all Kiwisaver accounts have fees attached to them. Not that the public isn’t partly to blame. Banks profit off of people’s lack of understanding.
Granted: all Kiwisaver accounts charge fees. But some accounts appear to charge sharply more fees than others.
Why do Kiwis tolerate high fees? Simply because the future seems so remote that in its distorted ways it makes it seem like it is not worth taking action to fix it.
So over the next couple of weeks (or in coming articles, whenever I get around to it), now that I’m done complaining, I’m going to take a look at what Kiwisaver fees are actually made up of so that I can take steps to mitigate the situation.
Thanks for doing this. An eye-opener indeed.