Simplicity vs JUNO vs BNZ – Battle of the low cost KiwiSaver funds

KiwiSaver has been around since 2007, but Simplicity shook things up in 2016, when they launched new KiwiSaver funds with dramatically lower fees than most other funds out there. They had good reason to shake things up, with the average Growth fund charging fees of around 1.4%, and over a lifetime of investing in KiwiSaver, these high fees can impact your retirement savings by hundreds of thousands of dollars.

Since 2016 we’ve had the launch of more low cost KiwiSaver providers – JUNO who launched in August 2018, and BNZ who revamped their KiwiSaver scheme to become a low fee one in May 2019. In this article I’ll be comparing the Simplicity, JUNO, and BNZ schemes. What are the pros and cons of each scheme? Are they really as cheap as they advertise, and if so, are they really worth it?

I will also compare against the Milford KiwiSaver scheme as a “benchmark” provider – Milford aren’t a low cost provider, but have been the top performing fund manager over the last 5 years. Do they offer anything that the low cost providers don’t?

This comparison is based on data from each provider’s Quarterly Fund Update documents for the quarter ending 30 September 2019. Quarterly Fund Updates are legally required to be published by providers, and contain details on a fund’s fees, performance, and what they’re investing in.

Update (3 October 2019) – Added information on Simplicity’s home loan product
Update (7 October 2019) – Updated JUNO’s target asset allocations. Growth fund now targets 10% in bonds (previously 0%)
Update (1 November 2019) – Updated article to use latest data from quarter ending 30 September 2019

1. What’s on offer

All three low cost KiwSaver providers, as well as Milford, our benchmark provider, offer Conservative, Balanced, and Growth funds, which we’ll be comparing throughout this article.

Simplicity

simplicity logo

Simplicity started up in 2016 and call themselves a low-cost, ethical KiwiSaver provider. They use a passive investing strategy and are a not-for-profit provider, with an aim to leave their members with more profit and money for retirement.

Members$ Under Management
Conservative1,614$65,609,664
Balanced4,629$162,177,785
Growth19,703$618,185,188

Simplicity also offers the Guaranteed Income Fund for members over 60 – this works as an annuity/insurance plan (charging a 1.3% fee as an insurance premium, for a total fee of 1.61%), giving a guaranteed income to the member for the rest of their life (once they qualify for withdrawing their KiwiSaver), even if the money in their fund runs out.

JUNO

juno logo

JUNO is a relatively new KiwSaver scheme, launching in August 2018. The scheme is managed by Pie Funds, a boutique investment manager who’ve been around since 2007. Unlike Simplicity, they use an active investing strategy, where a fund manager actively makes decisions about where to invest the scheme’s money, with the aim to outperform the market.

Members$ Under Management
Conservative149$3,739,062
Balanced456$12,029,605
Growth2,495$55,188,286

BNZ

bnz logo

It’s not often you associate big banks with low fees. BNZ used to offer a typical high-fee (and problematic) KiwiSaver scheme. However, BNZ completely revamped their scheme in May 2019, adopting a passive investing strategy and dropping their fees to be among the lowest in New Zealand.

Members$ Under Management
Conservative67,161$734,772,970
Balanced28,973$447,266,594
Growth40,686$585,630,975

BNZ also offer Cash, Moderate, and First Home Buyer funds.

Milford

milford logo

Our benchmark provider, Milford, has been a KiwiSaver provider since 2010, with their massively popular Growth Fund at $1.36 billion in size. They use an active investing strategy, and are far from being the cheapest provider, but their funds have been the best performing KiwiSaver funds over the last 5 years.

Members$ Under Management
Conservative3,098$124,061,870
Balanced8,315$360,810,945
Growth27,010$1,488,587,001

Milford also offers an Aggressive KiwiSaver fund, which they just launched in August 2019.

2. Fees

All KiwiSaver providers charge fees, which are typically made up of:

  • a Variable Management Fee (which may include performance fees), charged as a percentage of your balance
  • a Fixed Membership Fee, charged monthly or annually as a fixed dollar amount

Having low fees are the main selling point of our low-cost providers, and they aren’t afraid to show off this fact on their sites. They aim to significantly undercut traditional providers like Milford, potentially saving an investor hundreds of thousand of dollars over a lifetime of investing.

Example of JUNO’s advertising

The below table shows the fees charged by Simplicity, JUNO, BNZ, and Milford:

Variable feeFixed fee
Simplicity0.31%$30 per year
JUNOn/a (0%)Tiered fee based on balance:
Under $5,000: Free
$5,000-$24,999: $5/month
$25,000-$49,999: $15/month
$50,000-$99,999: $25/month
$100,000-$1m: $50/month
Over $1m: $100/month per $1m
BNZConservative: 0.50%
Balanced & Growth: 0.58%
n/a ($0)
MilfordConservative: 0.95%
Balanced: 1.29%
Growth: 1.06%
$36 per year

We can convert this into the below table which shows the percentage fee, for different amounts invested in each provider’s Growth fund:

$2,500$5,000$10,000$20,000$40,000
Simplicity1.51%0.91%0.61%0.46%0.39%
JUNO0.00%1.20%0.60%0.30%0.45%
BNZ0.58%0.58%0.58%0.58%0.58%
Milford2.50%1.78%1.42%1.24%1.15%
  • Simplicity are widely regarded as the cheapest provider, but that isn’t true if you have a smaller balance – the 1.51% fee at $2,500 is quite high. Although, Simplicity’s fee trends down as your balance grows larger
  • JUNO‘s fee (as a %) jumps up and down as you move between fee tiers, although remains consistently cheap. JUNO’s best feature is zero fees for balances under $5,000
  • BNZ‘s fee stays at a consistently low 0.58% for all balances
  • Milford are significantly more expensive than our low-cost funds across all balances

We can also work out what provider is cheapest for each precise amount invested. BNZ is the cheapest provider for only between $5,000 and $10,345, while Simplicity doesn’t become the cheapest until you reach a balance of $25,000. JUNO is the cheapest for various different balances, but are clear winners for balances under $5,000 or over $183,872:

BalanceCheapest Provider
Under $5,000JUNO
$5,000 – $10,345BNZ
$10,346 – $24,999JUNO
$25,000 – $48,387Simplicity
$48,388 – $49,999JUNO
$50,000 – $87,097Simplicity
$87,098 – $99,999JUNO
$100,000 – $183,871Simplicity
$183,872 or moreJUNO

3. What the funds are invested in

For each type of fund, we would expect to see them invested in the following assets (their investment mix):

  • Conservative: Mostly bonds and cash to reduce volatility and preserve capital over the short-medium term
  • Balanced: Roughly evenly split between bonds and shares
  • Growth: Mostly shares to achieve high growth over the long-term

Each fund has an actual investment mix (what asset classes they’re actually invested in) and a target investment mix (what the fund manager intends the funds to be invested in). Below are each fund’s actual investment mix as at 30 September 2019, with their target investment mix in brackets:

Conservative Funds

CashBondsShares
Simplicity5.95% (2%)72.66% (76%)21.39% (22%)
JUNO*86.65% (65%)2.57% (10%)10.83% (25%)
BNZ38.06% (35%)42.24% (45%)19.70% (20%)
Milford8.59% (6%)78.41% (76%)12.99% (18%)

*-0.05% other

Balanced Funds

CashBondsShares
Simplicity5.39% (2%)40.09% (42%)54.52% (56%)
JUNO*75.26% (20%)4.77% (20%)20.07% (60%)
BNZ6.64% (5%)42.53% (45%)50.83% (50%)
Milford12.73% (8%)32.21% (31%)55.06% (61%)

*-0.10% other

Growth Funds

CashBondsShares
Simplicity3.89% (2%)19.40% (20%)76.71% (78%)
JUNO*45.75% (10%)0.00% (10%)54.51% (80%)
BNZ6.79% (5%)23.01% (25%)70.74% (70%)
Milford8.84% (6%)19.07% (14%)72.09% (80%)

*-0.26% other

Simplicity

They are spot on with their actual asset allocations being very close to their targets. It’s what you get from passive investing – they have a plan, and they stick to it (as opposed to trying to time the market), removing the need for an expensive team of fund managers making decisions on where and when to invest.

Simplicity also invests in a couple of interesting assets:

  • They invest up to 5% of their Growth fund into Icehouse Ventures, who invest in emerging, high-growth, non-listed NZ companies.
  • They plan to lend some of the fund’s money out to first home buyers, as home loans. This should earn their investors a tiny bit more than having their money in bank deposits (similar to P2P lending), but the percentage of funds they will allocate to home loans is not yet known, and this is likely to increase risk.

JUNO

You’ll notice a common theme among JUNO funds – they’re holding bucketloads of cash. This is because share prices are at historic highs, and the global economic outlook is uncertain, so they’re trying to time the market by saving cash to buy shares when prices drop. This demonstrates their active investing strategy – although this doesn’t guarantee better performance and adds risk – they’ll look like geniuses if sharemarkets plummet sometime soon, but they’ll look bad if the markets continue to rise, causing JUNO’s performance to suffer from an underexposure to shares.

BNZ

BNZ have the least aggressive funds, for example, the Growth fund targets only 70% invested in shares, compared to approximately 80% for other providers. This feels too conservative to me, given people enrolled in Growth funds can potentially have decades to go before retirement, and will likely result in this fund performing worse than the other Growth funds over the long term.

Milford

Milford’s target asset mixes aren’t too much different from Simplicity’s. Although they have demonstrated some flexibility with their active investing strategy, holding slightly more bonds than their target in the growth fund, as share prices are high right now, making it hard to find value in the sharemarket.


Responsible Investing

KiwiSaver providers have come under fire in recent years for investing in controversial industries such as those dealing with firearms, tobacco, fossil fuels, and nuclear weapons. As a result, many providers now have Responsible Investment Policies, excluding certain types of companies from their portfolios.

Simplicity, JUNO, BNZ, and Milford all have Responsible Investment Policies which exclude companies dealing with controversial weapons, tobacco, and cannabis. Simplicity and JUNO take their exclusions further, banning gambling and adult entertainment companies from their portfolios.

Juno kiwisaver scheme exclusions
JUNO’s KiwiSaver scheme exclusions

But Simplicity has the most exclusions of them all, banning companies involved with alcohol and fossil fuels in addition to the above. Alcohol sure does have the potential to cause harm in our society, but my personal opinion is that excluding alcohol companies is taking it a step too far. What’s next? Banning fast food operators and soda manufacturers for causing obesity? Where do you draw the line between ethical and non-ethical companies?

4. Performance

Performance, how much a fund returned, is not the best criteria to look at when comparing funds – past performance doesn’t guarantee future results. It’s still a handy metric to look at (particularly at long-term returns), as we can spot any consistent under-performers, or any consistent outperformers.

Unfortunately, we don’t have enough long-term data to make any meaningful performance comparisons. Only BNZ and Milford schemes have been around for over 5 years, and only Milford’s Growth Fund has been around for 10 years (returning 13.2%/year over that time). Below is the limited performance data we do have. Returns are after fees and before tax

Conservative Funds

Past year’s returnsAvg. return over 5 years
Simplicity9.22%n/a
JUNO3.52%n/a
BNZ5.85%5.52%
Milford7.68%7.46%

Balanced Funds

Past year’s returnsAvg. return over 5 years
Simplicity9.00%n/a
JUNO6.51%n/a
BNZ7.73%8.27%
Milford8.65%9.89%

Growth Funds

Past year’s returnsAvg. return over 5 years
Simplicity8.84%n/a
JUNO12.04%n/a
BNZ7.77%9.63%
Milford8.39%11.57%

For Conservative and Balanced, Simplicity‘s funds have had the best performance in the past year. But a one-year timeframe is too short to make any meaningful conclusions. Going forward, Simplicity will deliver a market average performance each year, since they use a passive strategy – the idea behind this being that it’s very hard for an active fund manager to beat this average year after year.

We only have BNZ and Milford to compare over a 5-year period, and BNZ has been lagging behind Milford by quite a bit (by around 2% per year!) – although most of this is under BNZ’s old high-fee fund model. Can they turn around this under-performance with their revamped scheme?

JUNO‘s performance so far is interesting. It was disappointing for their Conservative and Balanced funds – not surprising given they’re mostly invested in cash. Their Growth fund has been an outstanding performer though. Another interesting fact is that JUNO’s manager, Pie Funds, has achieved returns of 16.60% per year since December 2007 with their flagship Growth Fund. It would be impressive if they could achieve similar, consistent results with JUNO’s KiwiSaver funds.

5. Additional features

Here are additional features of each provider that you may want to consider when deciding on one, although none of them appear to be anything major.

Simplicity

  • Members who have been part of Simplicity for over a year, can enter the ballot for a Simplicity first home loan. These home loans come at a fantastic floating interest rate (currently 2.95%), but there are a few conditions, such as requiring a 20% deposit, and the repayments must not exceed 30% of after-tax household income. I would be very cautious about switching to Simplicity solely based on this factor, given this feature appears to be more of a marketing gimmick.
  • The $30 annual membership fee is waived for under 18s. You’ll still be charged the 0.31% fund management fee
  • 15% of Simplicity’s fund management fees go to charity
Simplicity charities

JUNO

  • All fees are waived for under 18s, although there are probably very few under 18s who would pay the fee (for having a balance of $5,000 or more) anyway
  • You get a free digital subscription to the JUNO Investing magazine (worth $15.80 per year)
juno investing magazine

BNZ

fly buys

Milford

  • Milford issues monthly reports on their funds, including commentary on the funds’ performance, and what companies they’ve been investing in
  • Milford are the winners of Consumer NZ’s People Choice Award for KiwiSaver customer satisfaction in 2018 and 2019. This award covers “factors such as investment performance, client service and client communications”
consumer peoples choice milford

Limitations

There are a couple of limitations to picking Simplicity, JUNO, and BNZ KiwiSaver funds based purely on their low fees:

Low fees don’t guarantee outperformance

Having low fees don’t guarantee outperformance. The most important measure is a fund’s returns after fees – it’s better to have a fund that charges 1% and consistently returns 10% per year, than a fund that charges 0.5% but only returns 8% per year. Although, it’s rare (but still possible) to find such a fund that can consistently outperform the market.

Low cost providers don’t offer aggressive funds (yet)

The Growth funds offered by these low cost providers may not be aggressive enough for many investors. For example, Simplicity allocates 22% of the fund to cash and bonds. Those with a higher risk tolerance and a long investment timeframe may prefer their KiwiSaver fund to be 90-100% invested in shares to maximise their long-term potential returns. None of our low cost providers offer an “Aggressive” fund yet.

The best alternative provider would have to be SuperLife, which allows you to choose precisely what asset classes to invest in, from 38 different options. You could allocate your KiwiSaver to 100% global shares, or 100% Emerging Markets shares, or any combination you like. Their fees are slightly higher with a $30 annual membership fee, and fund management fees ranging from 0.49-0.73%.

Conclusion

Looking at Simplicity, I can see why they’re so popular. With their passive investing strategy, they stick to their target asset allocations, so you know exactly what you’re investing in, and there’s no messing around with trying to time the market. Simplicity’s fees are cheap, but they aren’t exactly as cheap as people suggest they are for low balances (compared to JUNO and BNZ), only becoming the cheapest provider after you reach $25,000. Plus I am not a fan of the dramas and marketing gimmicks they like to get involved in.

JUNO is a fantastic option to start your KiwiSaver off with. Having no fees for balances under $5,000 and under 18s is an incredible deal. The scheme is managed by a fantastic fund manager, Pie Funds, however we’re yet to see whether Pie’s great track record will translate into their future performance, and into the KiwiSaver space.

BNZ‘s KiwiSaver scheme has struggled in the past, but they are heading in the right direction with their new low cost model. They are even cheaper than Simplicity at low balances. Apart from that, I don’t see anything major that differentiates BNZ from the other providers. The thing I like least about their funds is that their allocation to shares is lower than other providers, which will likely negatively impact returns over the long term.

Our benchmark provider Milford, has fees significantly higher than the above providers. Apart from their great performance so far, they offer nothing special to differentiate themselves from others. Milford will have to work hard to continue their great performance into the future, to justify their high fees.

As for me, I started my KiwiSaver journey in Westpac’s scheme, later happily switched to Milford’s Growth fund, and have just joined JUNO! I really do like Simplicity’s funds and low fees, but I disagree with too many aspects of their scheme like their home loan offering.

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Disclaimer

The content of this article is based on my personal opinion and should not be considered financial advice. The information should never be used without first assessing your own personal and financial situation, and conducting your own research. You may wish to consult with an authorised financial adviser before making any investment decisions.