NEW ZEALAND TOP 15 : Retirement income issues 2019

Kaspanz (


At the end of each calendar year, Kaspanz lists what we see as the dominant New Zealand retirement income issues.


  1. Fees’ on Kiwi Saver and Managed funds are too high and have been for years. ANZ charge for managing Bonus bonds, is unjustified, and management fee should be half that cost.
  2. Contractors and self-employed miss out re Kiwi Saver. This group needs to be targeted with specific Kiwi Saver initiatives.
  3. Health topic requires both transparency and discussion. Very little commentator discussion on Health care issues, the delivery model and alternatives. Chronic illness across all age groups, and the end of life costs (last 6 months all age groups 0-90) dominate costs. Increasing health costs due to technology and supplier fees and products, and increasing the take up of private insurance, require attention and public debate.
  4. 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.
  5. Longevity and aging of the population is a demographic reality. The topic requires careful analysis and cautious assumptions. The last few years of life (Quality 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!
  6. The upward trend of New Zealanders over 65 in paid work continues, due to the fact most cannot afford to retire. However it’s the educated group that benefit mostly from this trend, and the hurdles to find work post 60 years, for the majority are considerable. Those most likely to need work later in life are the least likely to find it. There is little reason to be optimistic about this, discrimination re seniors is rampant and deep seated!
  7. 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, or the current Tax review group, would assist all political parties to make sound public policy choices re retirement issues.
  8. Kiwi Saver supports New Zealand Superannuation, and is a sound savings model. The default schemes should be based on an age related asset bias. Consideration should also be given to Government guaranteeing the scheme.
  9. 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 favored 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.
  10. 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. Life Time Income is the principal provider in NZ, with a sound business model, but competition is required.
  11. 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.
  12. Commission for Financial Capability should focus on Retirement Income issues. Engage in research both contracted and internal, and should also be the source of authoritative analysis on Retirement Income issues. A hub of research including contacted work on topics is required.  The focus on Financial Literacy while having merit in the intention requires too much implementation resource, to have any meaningful affect, and has left the Commission a limp reflection of what it could have been. The twice rebranding of the Commission name has been a failure marginalizing the Commission into a meaningless entity; New Zealanders have no awareness of the Commission name or role.​
  13. Failure to Launch. The trend of parent’s supporting adult children with financial assistance continues unabated, yet this is severely affecting retirement year’s savings. Current trends are parents subsidizing children in various ways, 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.
  14. 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
  15. Deposit Protection scheme. 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. Government has signaled change, but this requires urgency.


I like the idea of Kiwi saver lump sums, having a component on pay out  which must be taken in the form of a regular  payment. There is a common sense ring about 60% in the  form of a pension and 40% a  lump sum do what you like with it! Unlikely  to be achievable in today’s  legal  and social climate, but…….

Budget Buster: Annuities might not spin your Kiwi-Saver into gold

Richard Meadows 06:00, Nov 03 2019

OPINION: The nine most terrifying words in the English language: “I’m from the Government and I’m here to help.”

Experts have called for our Kiwi Saver balances to be transferred into a state-backed annuity scheme at age 65 and then drip-fed back to us year by year.

The implication is that we are too stupid to manage our own spending in retirement, and need to be protected from ourselves – like small children who blow all their pocket money on lollies.

Honestly, this might be true of some people. And the scheme would have an ‘opt out’. But if you’re going to meddle, it pays to actually have a better plan than the schmucks you’re patronising.

Annuities are interesting – but they’re sure as heck not for everyone. If you’re unlucky enough to retire on the brink of a major downturn, and have to eat into your nest-egg right away, it might not recover.

The old-school annuities were terrible. You invested a lump sum, and received a guaranteed income for life. But there was no way to get your money back out, the rates were unattractive, and the provider kept your money if you died early, meaning no inheritance for the kids.

The market was all but dead until a few years ago, when the first ‘variable’ annuity company arrived. Lifetime Retirement Income is available as a standalone product, and through the Simplicity Kiwi Saver scheme.

Say you invest $100,000 in a Lifetime annuity at age 65. You’ll receive a guaranteed income of 5 per cent of that sum, every year until you die. If your balance grows above $100,000, your income grows with it. If it falls below $100,000, or even to zero, you never earn less than the base amount – in this case, $5000 a year. You can withdraw your balance without penalty. And when you die, whatever’s left over goes to your estate.

Variable annuities are a big improvement, but they have their downsides: an annual management fee of 1 per cent of your balance (cheaper through Simplicity), and an insurance premium of 1.35 per cent.

Taken together, it’s a fair bit steeper than investing your money in, say, a passively managed Kiwi Saver fund.

Annuities have improved but remember, the house always wins, says Richard Meadows.

The difference is that annuities are more like insurance. You’re paying a premium to protect against ‘sequencing risk’: on average, long-term investors tend to do pretty well. But if you’re unlucky enough to retire on the brink of a major downturn, and have to eat into your nest-egg right away, it might not recover.

An insurer can spread this risk over many different time periods, which is a luxury individuals don’t have: you only retire once, and it’s blind luck whether your timing is jammy or rotten.

You’re also insuring yourself against ‘longevity risk’: running out of money before you run out of life. Again, an insurer can manage this risk by spreading it across many clients. The calculations it runs for each person will sometimes be wrong, but on average, it’ll turn a profit.

Just like insurance, buying an annuity has a negative expected payoff – the house always wins. But also like insurance, thinking in terms of averages is a mistake.

An annuity might be insurance against running out of cash.

If your house burns to the ground, it’s not very reassuring to know that the ‘average’ house is still standing. The point of insurance is to cover extreme scenarios that are unlikely to occur, but would be devastating if they did.

This is a decision that comes down to your circumstances, and tolerance for risk. You might be happy to take your chances with sequencing risk, and make other plans for dealing with a market downturn – like cutting expenses, or picking up part-time work.

You can also self-insure as much as possible – in this case, by saving a healthy buffer over and above what retirement calculators recommend (again, these are based on the flawed concept of an ‘average’ investor).

And it’s not all-or-nothing. You might use some of your nest-egg to buy an annuity, locking in a modest guaranteed income, and invest the rest in the normal fashion, in the knowledge that it’ll probably enjoy superior returns.

Annuities are no silver bullet, and anyone who thinks they can magically fix the retirement savings gap is dreaming.

As Ralph Stewart, the CEO of Lifetime, put it: “Ultimately lifestyle in retirement is a personal choice and should never be imposed on Kiwi Savers.”

Instead, Stewart says the answer lies in providing different options. Amen to that. I’m glad that the annuity option exists – but it ought to remain optional


Posted by Alec Waugh 16 November 2019

New Retirement Commissioner


Govt names broadcasting exec as new Retirement Commissioner

Jane Wrightson: Retirement Commissioner

NZ On Air chief, Jane Wrightson, has landed the plum Retirement Commissioner (RC) role in a move that sees a financial services outsider in the role for the first time.

Wrightson was named this morning as permanent replacement for Diane Maxwell, who finished her tumultuous term as RC this June.Peter Cordtz has been acting RC since Maxwell’s exit.

While Maxwell and her RC predecessors have had financial industry experience, Wrightson comes to the role with a long career in various broadcasting positions, dating back to a nine-year career as head of commissioned programmes for Television NZ starting in 1981.She was also chief film censor before taking up the deputy chief role at NZ On Air in 1994. After intervening chief executive jobs with SPADA and the Broadcasting Standards Authority, Wrightson returned to head NZ On Air in 2007.

In a statement, Commerce Minister, Kris Faafoi, said:“Jane’s experience in that key role within New Zealand’s multi-million dollar media sector has helped us grow our national identity and showcase it to the world.“NZ On Air connects New Zealanders and helps reflect what it is to be a New Zealander.“It supports inclusion and embraces our diversity through the local content it funds.

“The abilities Jane has shown in leading that work will neatly fit into the work she’ll be doing with the Commission for Financial Capability on a national strategy to help New Zealanders get ahead financially,” Mr Faafoi said.

Wrightson will take up the job from February next year.

Posted by Alec Waugh 1 November 2019

We are living longer but in poor health!

This writer is sceptical re the New Zealand headlines on longevity, accepting we are living longer, but the key issue is quality of life, not just whether one lasts a further 18 months

This 2017 United Kingdom article reflects that, and remember New Zealand normally  mirrors research like this. Life expectancy is increasing, but the number of years of healthy life in retirement is not keeping up, with dramatic variations seen across the country

Experts warn that the research raises concerns about health inequality but also how care and support will be funded in the future.

Adults are spending an increasing number of their retirement years in poor health, a think-tank on ageing and population has warned.

The report, which focuses on the situation facing those approaching retirement, also highlights the growing inequalities in life expectancy around the country.

“We need to start having very frank discussions about what social care is going to look like, what healthcare is going to look like, what taxation is going to look like, what labour and immigration policies are going look like – and all of this needs to be set against the context of an ageing society,” says Dean Hochlaf, a co-author of the report from the International Longevity Centre.

The report also flags up that the number of years one can expect to be healthy varies dramatically by location: while 65-year-olds in the London borough of Tower Hamlets have just 6.5 years of healthy life expectancy ahead of them, those in the more affluent borough of Richmond can expect 14.5 years.

Moreover, while life expectancy is increasing among both men and women, the rise in number of expected years of healthy life is not keeping up.

“Obviously it is a great social achievement that we have managed to increase life expectancy, but healthy life expectancy is so crucial for ensuring that there is a better quality of life for older adults,” said Hochlaf. “Initiatives, for example, to extend the working life hinge on this idea that we have a healthier older population.”

The report, funded by property management group First Port, also reveals that while the gig economy is often treated as an issue for young people, older individuals are also affected – being proportionally more likely to be self employed. Indeed, more than a quarter of zero-hours work is undertaken by the over-50s.

“If older workers want to participate in the flexible labour market, and if they can benefit from it, it’s a good thing – but we also have to make sure that they are recognised as a major component of this new sort of gig economy, ” said Hochlaf.

While the majority of those aged 55-64 own their own homes without a mortgage, the report shows that in recent years there has been an uptick in private renting, with almost 12% of the age group renting their home in 2015/16 – up from 4.1% in 2003/04.

Sarah Harper, professor of gerontology at the University of Oxford, said that the report highlights that pensioners were far from entering an age of rest. “Actually, people are still in the labour market, they are doing large amounts of caring not only for grandchildren but for other other adults, so it is actually for many people a time of activity still,” she said.

But Harper cautioned it is difficult to measure healthy life expectancy, and flagged the large geographical variations.

Centenarians are fastest growing a

“The evidence seems to be that we are pushing back the onset of disability and therefore if anything we can expect people in their 60s and even early 70s probably to have better health and therefore to be able to keep active for longer,” she said. However, she noted that evidence also suggests an increase in time spent living with disability among the oldest members of the population.

Debora Price, professor of social gerontology at the University of Manchester, expressed concern at the findings. “We can see inequalities increasing, and that for many people this is a very tough period of life,” she said.

“We know that many older people live with very low incomes, poor housing, long-standing disabilities, high risks of social isolation and loneliness, and little power to change things,” she added. “This is very starkly shown in the report by the differences by local authority … these inequalities go across the life-course and are reflecting a really unequal society at all ages.”

Simon Bottery of the health charity the King’s Fund pointed out that changes in the fertility rate mean older people are likely to have fewer children to offer support.

“Overall, you are faced, I think, with this very clear picture of increasing care and support needs and a real difficulty in identifying who is going to provide it and who is going to pay for it.”

This article was written by admin