"The reports Pascoe Barton provide are great. The taxation reports save our accountant a lot of time."

R & J

KiwiSaver Periodic Disclosure

Recently KiwiSaver providers had to commence providing Quarterly Disclosure Statements for their various KiwiSaver Funds. This includes fee and performance reporting in a standardised approach.

When it comes to performance reporting, the providers are required to provide after tax and fee returns. The tax rate, or more correctly, the prescribed investor rate (PIR) that is used is the highest PIR rate being 28%. This is different to the figures that Research House Morningstar publishes. They use the gross of tax return figures.

Locating the Quarterly Disclosure Statements on the websites is not straight forward and is an area that should be addressed by both the managers and the FMA. From the survey that we carried out, one high profile manager, Milford Asset Management did not have their website links working correctly, so we were not able to obtain the relevant information that we were seeking.

Some managers provide disclosure statements for the various asset classes used. They also show a target asset allocation mix. Some of the asset allocation mixes were unusual in that they did not bear much resemblance to the fund descriptive name. For example NZ Funds Growth Strategy has less than 50% in growth assets. Its cash and cash equivalents percentage shown was 51%. Despite this, it had a very high other fees and costs figure of 0.98% for the year ending 31 March 2013. This was on top of its annual management fee of 1.08%. The footnotes state that the performance fees of 0.63% were included in this section. This is an unusual approach as there is a dedicated reporting area for performance fees.

Performance fees are something that few KiwiSaver managers charge. Our survey found that the Fisher Funds Growth Fund charged 1.11% as a performance fee. The Aon Milford Active Growth Fund had performance fees of 2.32%. One of the oddest performance fees was the 0.08% charged by NZ Funds for their inflation strategy, despite the fund only returning 2.74% for the year after deductions for fund fees and tax!

One of the major problems with performance fees is that the manager sets them against a benchmark that they themselves select. In the case of the Fisher Funds Growth Fund, this is based on the official cash rate plus 5%. Currently they only need to achieve a return of 7.5%, and then they receive a performance fee of 10% for the excess return. The Milford performance fee is 15% of the return above 10% pa. Both the Fisher and Milford funds are subject to what is known as a high water mark. That is if the fund decreases in value, the performance fee does not kick in until it returns above the previous value that the fee was last paid on.

What we did find in our survey was the major banks’ KiwiSaver funds did not have performance fees associated with them. We also found that there was a reasonable difference in performance between funds, even when the asset allocations were similar. We believe it is well worth taking independent investment advice on KiwiSaver, which for many investors will become their largest investment asset.


Steven Barton (FSP 32663) and Susan Pascoe Barton (FSP 32382) are Certified Financial Planners and Authorised Financial Advisers.  Their initial disclosure statements are available free of charge by contacting them on (07) 3060080 or they can be downloaded from www.pascoebarton.co.nz. This column is general in nature and should not be regarded as personalised investment advice.