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The piece of the puzzle others don't mention

Many pension transfer providers in New Zealand will offer to transfer for no fee upfront... however there is one huge catch - a locked in pension fund with high yearly management fees.

We calculate that you may end up with a fund which is 20% lower in value at retirement when the high management charges are taken into account.

This is all due to the compounding growth of the investment.

The painful comparison

Consider two scenarios both relating to a pension transfer to New Zealand of $100,000.  Under scenario one where there is an upfront fee of 5% charged for arranging the pension transfer and fund charges an annual management charge of 0.2%. 

Under the second transfer scenario there is no upfront fee but the fund provider in New Zealand charges an annual management fee of 1.5% (some providers in New Zealand charge even more than this).

No matter which way you view it the high yearly management charges hurt more as they compound year after year to diminish the value of your fund.  We strongly recommend making you find out about all fees you are liable for upfront before embarking on a pension transfer.  Some funds may let you out after a fixed length of time, say five years, but will charge high exit fees for the privilege. 

Our clear position

We receive no ongoing fees from any New Zealand superannuation providers.

We deliver the lowest management fee bases in New Zealand at around 0.2%.

Your investments are not locked in and their are no exit charges from the New Zealand scheme.

Value of the transferred funds at retirement

Years to retirement

Scenario One:
5% transfer charge
0.2% management fees

Scenario Two:
No transfer charge
1.5% management fees

Value Difference

10

$201,331

$187,714

($13,618)

20

$426,667

$352,365

($74,312)

30

$904,246

$661,437

($242,809)

The above example assumes the following: An 8% growth rate in the funds, and there are no other hidden charges.

The final insult

We have seen instances where the management charges are as high as 1.5% a year as well as the transfer company charging between 3% and 5% upfront as well.  Be very aware.

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