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FMA announces methodology for KiwiSaver fee disclosure

Media release
MR No. 2017 –23
8 June 2017

The Government has recently introduced regulations requiring KiwiSaver providers to disclose fees in dollars in members’ annual statements. The Financial Markets Authority (FMA) has been consulting on a methodology that will assist KiwiSaver providers to understand the requirements of those regulations.

The FMA today announced its decision on the methodology for calculating the fees charged to members by dollar value.

The FMA’s preference is for KiwiSaver providers to use the investor’s balance at the date the units of the fund are valued or the cents per unit (CPU) method. 

The initial consultation proposed dollar fees could be based on the investor’s average balance or the total annual fund charge (TAFC) method. This was to enable the introduction of fees in dollar values for individual KiwiSaver annual statements by March 2018.

However, some market participants responded to the consultation and said they wanted to use the investor’s balance at the date the units of the funds are valued (CPU). This is a more accurate method, but can be more complicated to achieve. The FMA has listened to the submissions from industry and will adopt CPU as its preferred method but will also allow calculation of the dollar value using the TAFC method.

Both methods deliver the same desired policy outcome and give investors the information they need: the fees they pay in dollars.  KiwiSaver providers will be allowed to use either method. This will be reviewed within 5 years.

The FMA is now seeking feedback on the precise wording of the methodology notice. The final notice adopting the TAFC and CPU methods will be published following this consultation.

KiwiSaver providers are also strongly encouraged to disclose total fees as a percentage of the KiwiSaver members balance as well as fees in dollar terms. The fees in annual statements from 2018 will be personalised to each member. By showing the percentage value alongside the dollar value members can compare their fees over time, year on year.

The FMA encourages KiwiSaver members to compare the fees they are paying for their chosen funds with those of other providers and they can do this by looking at the fund updates and the product disclosure statements.

Liam Mason, FMA Director of Regulation, said, “By setting out fees in dollar terms, we believe KiwiSaver members can more clearly understand how much they are paying their provider every year. We hope that seeing the actual dollar amounts being paid in fees will prompt more KiwiSaver members to think about value for money from their KiwiSaver. KiwiSaver providers should be willing to have conversations with their members to explain why they believe their fees are reasonable.”

The FMA is now consulting on the draft methodology notice and the revised guidance note for disclosure of fees in managed funds to ensure there is consistency across the industry.

The consultation document can be found here.

Ends

Contact:

Edwin Mitson
Ph: 021 702 036
Edwin.mitson@fma.govt.nz