Great article thanks Alec.
For someone who despairs that the lack of interest in these issues it is refreshing to see you starting the debate.
The RPRC have updated the 2013 figures on labour market participation for 65+ group and it is clear that many more people are staying in the work force longer. (They are living on average longer too). I agree that NZS is brilliantly designed to encourage this, but I argue we pay full time high-income earners too much in net terms, and that is precluding other things we could do with the money to aid the working age population and children. Just tax them more!. And you are right that we will all adapt to the demographic change except that from 2031 the numbers of frail elderly will begin to mushroom to around 4 times as many as today by mid-century. Their income and care needs requires planning today.
The point of the series was to start to jolt the political process to look seriously at ways of helping middle people protect themselves against outliving their capital and needing expensive long-term care. At the moment we expect people to manage their own lump-sums in an often dangerous and risky investment world.
These are big issues- lets keep talking. The RPRC are putting the best brains together from NZ and Australia to work out a unique annuity solution for NZ. We will show case this later in the year.
Susan St John
Susan St John’s Rejoinder
Submitted on 2014/06/08 at 7:04 pm
3 thoughts on “Susan St John’s Rejoinder”
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Encouraging news, but improving financial literacy amongst an ageing population will not help those who get caught out if they have overseas pensions. No matter how unique an annuity solution may be, until law is corrected and applied with honesty, the situation will remain grim for some.And for some there is no other option except to work.And pay taxes, and get the bump from NZ Govt tax credits with their Kiwisaver plans. All these ‘ands’ for 70,000 or so people who have planned and worked very carefully for their ‘Golden Years’, only to have their seemingly secure financial rug pulled out from underneath them. All aspects of finding a solution to annuities must be carefully considered, and it is evident this is being done by RPRC, but it remains to be seen how forceful the political jolts will be.
Jan
Agree that financial literacy is not the answer to the problem of ensuring income security over a retirement of uncertain length. And then there are the arbitrary policies such as affect many with overseas state pensions when they did not expect it that you mention. One really bad aspect is when a spouse’s overseas pension is offset against the other spouse’s NZ super.
In the 21st century this is archaic and extremely unjust and it is time for politicians to hear it strongly in an election year. Having additional income in older age to supplement the pension is critical for extra dental and hearing and eyesight needs among a myriad of other costs.
While it helps to be aware of the pitfalls out there it doesn’t matter how clever you are if live to 105 when you expected to die at 90 if you dont have enough money for that long. There are big systemic issues around inflation and longevity that the individuals cannot solve alone, but section 70 you refer to is a policy created mess that can be fixed. If we required 25 years residency and abandoned section 70, a lot of the problems would go away. The RPRC has put this forward as an option for debate and we hope to have a session at the university in December to progress this and other ideas.
Thankyou for your response Susan St John.
Many of us victims of the current policies concerning NZS appreciate the initiatives and research RPRC have completed and presented over the years; it is unfortunate however, that we have a Government which will not address the serious anomalies and issues at hand.
Even pro rating the amount of NZS one receives based upon the number of years one has lived in NZ as an adult,is a recommendation which has been presented and discussed by you and others, and is a meritable gesture in attaining fairness as well as the proposal you mentioned.
Recently MSD had me go through a lengthy process in obtaining the details of my own personal contributions which I made solely towards my German annuity.They established what percentage that was of my total monthly allowance, announced they would deduct this from my overall deductions and that I would receive about $70 NZS per fortnight. This small joy was then replaced by disappointment as they proceeded to apply the spousal deduction policy because of my husband’s annuity. Between the two of us,we now get my NZS of about $5 every two weeks. So along with Section 70 being wiped, so should any spousal deductions policy which has been intertwined within its application.
Spousal deduction and overseas pension deductions are a double whammy.
One must consider too, the number of people who caught up in the quagmire of Section 70 and who are like ourselves, are financially savvy and had prepared for our retirement. We are now part of the workforce again and will probably live into our 90’s but what on? We have effectively had over $500k stolen from us, and if you look at the 70,000 victims of the current policy, we all have lost millions to the koffers of the NZ Government.We have become part of the group living under the deemed level of income required to sustain an enjoyable standard of living and a good quality of life.
Good luck to you and your team for a successful round of challenges.The greatest challenge will be to have your recommendations acted upon.