Earlier this week, the Financial Markets Authority (FMA) released its KiwiSaver Annual Report for the year ended March 2021, which shows total funds under management reached $81.6 billion, or double the $40.8 billion held in 2017.

However, in a LinkedIn post, the outspoken managing director of Simplicity Sam Stubbs says the combined fees revenue made by KiwiSaver providers of $650.3 million (up 20.7% from the same time last year) was "pure cream".

"The FMA uses more polite language, but I won’t.

"The largest KiwiSaver managers are just greedy and still not passing on their enormous benefits of scale," says Stubbs.

"The irony is many were gifted their scale by being appointed default providers. So how do they reward their customers? By ripping them off.

"Fees in New Zealand are very high by global standards, and managers no longer have the excuse of small scale.

"And to dissuade any bleating about their need for shareholder returns, the capital required to be a KiwiSaver manager is effectively zero. Their fees and profits are pure cream."

Stubbs has some support from the FMA's director of investment management Paul Gregory, but Mint Asset Management's David Boyle says fees are only part of what KiwiSaver is about and would come down as funds grew over time.

Just yesterday, ANZ announced it will scrap its $18 annual membership fee from the ANZ KiwiSaver Scheme, ANZ Default KiwiSaver Scheme and the OneAnswer KiwiSaver Scheme.

"We’ve also reduced the management fees of the Conservative Funds (excluding the Default Fund) and Conservative Balanced Funds by 0.22% and 0.15% respectively," says ANZ's acting managing director of funds management Stewart Taylor.

“We regularly review fees as we achieve greater economies of scale - this latest change particularly benefits members with lower balances or those just starting out," Taylor says.

Gregory says one of the FMA's major focuses this year was on value for money and that the rate of growth in total fee revenue was a function of the percentage-based investment management fees that providers take as a cut of their members’ balances, not a sign that fees charged were increasing.

But he says, as a whole, "...the KiwiSaver providers are not passing on the value for money they are receiving through fees".

"Those active funds still need a nudge," he says.

"Default provider status is a privilege and remains a privilege...and there will be a lot of scale heading to those new default providers, but not straight away.

"We expect these sorts of moves to show up in the next annual KiwiSaver report and flatten when you get to scale in the industry, we trust our value for money guidance will make them look at what they are charging and what value they are providing for it and the precedent being set by other providers in the market."

Gregory says that trend was already evident with fixed fees, or administration fees, which decreased by 4.8% to almost $80.8 million, as several KiwiSaver schemes reduced them or changed their structure.

“This is appropriate, as these fees were only intended to help providers cover costs in KiwiSaver’s early stages,” Gregory says.

Boyle says fees revenue was up simply due to a buoyant stock market and that fees charged by providers were not over the top.

"As the fund size grows, costs go up as well and you need to find a happy medium.

"As an industry, we have to be pretty transparent and the customer can see clearly what their fees are in real terms."