Westpac is removing its yearly $12 administration fee and reducing fees on its Westpac KiwiSaver Scheme funds.
The Westpac KiwiSaver Scheme is managed by BT Funds Management NZ.
Westpac acting chief executive Simon Power said the reductions would help boost returns for savers.
The bank, which last cut its fees in December 2019, was one of six KiwiSaver providers to keep its lucrative default status after a Government review which focused on driving fees down.
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Annual fees on a $20,000 balance will reduce from $130 to $80 for our Conservative Fund, $158 to $100 for our Balanced fund and $172 to $110 for our Growth fund, Power said.
The changes would take effect by the end of September and the new default Balanced fund would open to members in December.
At the low end, charges on Westpacs Cash Fund will drop from 0.29 per cent to 0.25 per cent, while charges on its Balanced Fund would drop from 0.73 per cent to 0.50 per cent and its Growth Fund would drop from 0.80 per cent to 0.55 per cent.
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Moneyhub senior researcher Chris Walsh said the move was good news for the industry and showed how high fees had been. The 25 basis point haircut to the yearly growth fund was particularly high, he said.
That will certainly add up over 10, 15 or 20 years. So every 25 basis points you save is going to compound your returns.
The cut to the growth fund charge brought it in line with the index funds from the challengers, although it was still more expensive than the likes of Superlife and Simplicity.
Its a big move from a big bank.
In April, The Financial Markets Authority (FMA), which regulates KiwiSaver schemes told KiwiSaver scheme managers they must review their fees every year, and demonstrate they are providing savers with value for money.
Moneyhub senior researcher Chris Walsh says the drop in KiwiSaver fees by Westpac showed how high bank fees have been.
Economies of scale had not typically been shared with savers by scheme managers through lower fees, it said. The authority issued guidance to KiwiSaver schemes on how it expected them to prove they were not charging unreasonable fees, which were prohibited by KiwiSaver rules.
FMA investment management director Paul Gregory said at the time it strongly encouraged KiwiSaver scheme providers publish value for money reports each year.
Walsh said three years ago this wouldnt have happened.
It shows you how expensive the fees are if you can drop them that much and carry on as normal … if countdown dropped its prices 30 per cent it would go bust.
The drop in fees was likely to command customer loyalty. Customers tended not to switch between banks but rather move to challengers such as Simplicity or Milford, Walsh said.
Data from the FMA shows Westpacs growth fund previously had a five-year average return of 10.71 per cent, with members getting 9.79 per cent after fees.
The ANZ growth fund averaged five-year returns of 10.73 per cent, or 9.65 per cent after fees and ASBs growth fund averaged five-year returns of 10.57 per cent, or 9.90 per cent after fees.
