KiwiSaver fund management fees have skyrocketed 13.5 percent in the past year.
The Financial Market Authority (FMA) posted its annual report on Thursday and expressed concern over the rising fees.
The report revealed KiwiSaver's average management fee rose to $132 per member.
"We have previously said we were surprised costs per member had not fallen faster, given the growth in funds under management," said FMA director of regulation Liam Mason in a statement on Thursday.
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The funds under management have risen over the past year meaning there's more money in KiwiSaver -17 percent more in total.
"So, hypothetically if you had $10,000 last year and you have $20,000 this year, [the fees are] a flat rate of 1 percent. Meaning last year, you paid $100 in fees, and this year, you'll pay $200," FMA spokesperson Andrew Park told Newshub.
But because there's more money, the FMA expects investment management fees to come down.
"We expect fees to be coming down a bit quicker, especially among the larger providers, " Park continued.
"They should be able to return these benefits to the investors."
Mason says the FMA will investigate further.
"Over the coming year we will be asking KiwiSaver providers to demonstrate how they are providing value for money for members," he said.
"We are concerned that the benefits of the scale, at least for the larger providers, are not being passed on to investors."
For investors who are concerned they are not reaping the benefits of their investments, the FMA recommends using its KiwiSaver tracker.
The tracker will compare and contrast different providers and shows the risk profile and returns between different funds.
It also displays how much of the return is paid to the manager in fees.
A separate independent review commissioned by the FMA suggested KiwiSaver fees are higher than their UK counterparts.
The FMA will conduct further research over the next year.
Mason says despite its high fees, the report confirmed the increasing importance of Kiwisaver in supporting Kiwis.
The amount of money withdrawn by people topped $1 billion for the first time. A further $953 million was withdrawn to help people buy their first homes.
The Financial Services Council said it welcomed the release of the report.
"This is a valuable annual temperature check of the KiwiSaver system, how the scheme is evolving, what's going well and what remains a work in progress," said CEO Richard Klipin.
"We also acknowledge the clear message in the report about fee levels and the desire from the FMA for them to reduce."