Myths about KiwiSaver: Part 2

Mr Paul says funds charge fees because they employ resources to manage the money (File)
Mr Paul says funds charge fees because they employ resources to manage the money (File)

More than two million people have joined KiwiSaver.

But KiwiSaver expert Binu Paul says many people are a bit confused about how the savings scheme works. He is the founder of SavvyKiwi, an app that allows people to manage their KiwiSaver account.

So this week Newshub is looking at some of the myths and misunderstandings about KiwiSaver.

There is no doubt that fees have a huge influence on your returns.

The less you pay your fund manager in fees the more money you will have left in your account to be invested and grow in the coming years. Even a fraction of a percent in fees makes a big difference over a long time period.

But despite the importance of minimising your fees there are other factors to consider.

Mr Paul says funds charge fees because they employ resources to manage the money. So the managers need to pay salaries, pay their service providers (trustees, custodians, lawyers, etc.). They also spend money on technology, like computers.

Mr Paul says fees are the single biggest determinant of future returns. But he says if you go out looking for cheap you might end up getting cheap.

So it is important to ask whether your manager is offering good value for money.

Watch the video.

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