Each year Kaspanz produces the years Top 15 Retirement Income issues.

This year we have decided to highlight the top 5.

Kaspanz   TOP 5- RETIREMENT INCOME ISSUES NZ -2018

1. New Zealand Superannuation is the safety net for all retirement income planning. The model is very sound, efficient, effective, reasonable costs, excellent for women, and keeping the elderly from poverty. The costs of New Zealand Superannuation over time are often exaggerated. The simplicity of the current model of NZ Superannuation, and its universality is acknowledged as a world leader.  Minor adjustments only are required, as and when they surface. The evidence clearly shows New Zealand has got it right. Consumers want consistency in retirement income issues, and the first Parliamentary party to accept this, will harness good will and ballot box support.
2. Kiwi Saver schemes supports New Zealand Superannuation, and is also a sound savings model. Consideration should be given to Government guaranteeing the scheme. While fees for each scheme are now more transparent, fees remain a “Golden mile “for many providers and well above OECD norms. Default schemes should align each account to an age formula. The scheme is a retirement income provision, and any trend for early withdrawal increases requires policy attention.
3. Longevity and aging of the population is a demographic reality. The topic requires careful analysis and cautious assumptions. Longevity is increasing, but note the last few years  of life may be impaired health, with a probability of  a critical illness ( e.g. cancer, stroke, heart, prostrate, Alzheimer’s ) affecting many, and the ability to work an issue. Different implications for different groups apply when longevity is discussed. Longevity for some groups is lower than others. Health topics require both transparency and discussion. Increasing health costs due to technology and supplier fees and products, (price gouging) elective surgery options and increasing the take up of private insurance requires attention and public education.
4. Pension eligibility and portability issues e.g. Section 70 of the Social Securities Act needs review and the Social Security agreements NZ has with a number of countries require transparency and monitoring. The spousal issue relating to overseas pension deductions and NZ Superannuation is unfair and needs urgent attention.
5. New Zealand is one of the few countries that neither insures nor guarantees bank deposits, instead adopting the moral hazard principle, “make wise choices”. This is poor policy and needs to be changed.* Note it appears the Government is heeding the call, and will review the issue in 2019

Did you want to know the 2017 top 15-See Below

• New Zealand Superannuation is the safety net for all retirement income planning. The model is very sound, efficient, effective, reasonable costs, excellent for women, and keeping the elderly from poverty. The costs of New Zealand Superannuation over time are often exaggerated. The simplicity of the current model of NZ Superannuation, and its universality is acknowledged as a world leader.  Minor adjustments only are required, as and when they surface. The evidence clearly shows New Zealand has got it right.

• Longevity and aging of the population is a demographic reality. The topic requires careful analysis and cautious assumptions. Longevity is increasing, but note the last few years  of life may be impaired health, with a probability of  a critical illness ( e.g. cancer, stroke, heart, prostrate, Alzheimer’s ) affecting many, and the ability to work an issue. Different implications for different groups apply when longevity is discussed. Longevity for some groups is lower than others!

• The surging upward trend of New Zealanders over 65 in paid work continues, probably due to the fact most cannot afford to retire. However it’s the educated that benefit mostly from this trend, and the hurdles to find work post 60 years, are considerable. Those most likely to need work later in life are the least likely to find it.
• Consumers want consistency in changes to retirement income issue policies, and long lead in time to any proposed changes. The first Parliamentary party to accept this will harness good will and ballot box support. A task force similar to the Tax working Group 2010 would assist all political parties to make sound public policy choices re retirement issues.
• Kiwi Saver supports New Zealand Superannuation, and is a sound savings model.  The default schemes should strongly consider an age related asset bias. Consideration should also be given to Government guaranteeing the scheme.
• Fees and costs for Kiwi Saver schemes are more transparent. This trend must continue.
• Passive and index funds, generally produce similar returns to active funds. When lower fees for passive funds are factored in, schemes following this approach should be a favoured option.  Predicting in advance the performance of active managers is impossible, and with their fee structure normally higher and effecting returns over time, the client aware principal applies.
• Buying an annuity or similar product upon retirement or following receipt of post Kiwi Saver lump sums and drawing an income from it, makes sense. A Kiwi Saver provider has recently introduced the first Kiwi Saver annuity product.
• Rental accommodation issues need review. Housing needs are changing and the standard length of term and the issue of short term leases is just an example of matters requiring attention. A national Housing symposium or similar would be helpful.
• Future projections for calculating pensions and health costs must recognize the inherent adjustment factor that occurs in society, and the error factor in long term assumptions is very high!
• Failure to Launch. The trend of parent’s supporting adult children with financial assistance continues unabated,  yet this is severely affecting retirement years savings
• Current trends are parents subsidising children in various way, including significant child care for under 5’s, housing loans and early inheritance gifting. Parents homes are becoming, a place of return by siblings 20-45yrs following divorce or early work experience. These costs are carried principally by parents.
• Health topic requires both transparency and discussion. Chronic illness across all age groups, and the end of life costs (last 6 months all age groups) dominate costs. Increasing health costs due to technology and supplier fees and products, elective surgery options, and increasing the take up of private insurance require public debate.
• Senior year people need help in making better use of the wealth tied up in their homes, to support their living options. Conversations on retirement village issues, reverse mortgages /house equity issues and inheritance approaches, need visibility and increasing discussion.
• Pension eligibility and portability issues e.g. Section 70 of the Social Securities Act needs review and the Social Security agreements NZ has with a number of countries require transparency and monitoring. The spousal issue relating to overseas pension deductions and NZ Superannuation is unfair and needs urgent attention.
• New Zealand is one of the few countries that neither insures nor guarantees bank deposits, instead adopting the moral hazard principle, “make wise choices”. This is poor policy and needs to be changed. This is one occasion when we should follow the Australian example

*Editor comment 2017: Media commentary on retirement income issues, remains traditionally superficial with little historical trend analysis, or comparative research. Full marks to Mary Holm, Susan St John, Rob Stock, Martin Hawes, Brian Shearer, and Brian Gaynor for their thoughtful approach. Awareness of Scandinavian approaches, and approaches adopted in countries like Canada, Chile and South Africa would be useful additions to the discussion. A task Force on Retirement Income is a must!

 

 Posted Alec Waugh 12 January 2019