No doubt where this writer stands on fee’s
No doubt where this writer stands on fee’s
Retirement Income Watchdog Kaspanz issues the following statement on Retirement Commissioner suggestions NZ Superannuation.
Today [Alec Waugh] of KASPANZ said . The departure of John Key, assists the doom and gloom brigade, to clamour for a rise in NZ Super entitlement age. His departure coincides with the Retirement Commissioner suggesting the age of entitlement rise to 67, in an 8 year transition period beginning 2027. The starting date and transition period is too short, no change is required prior to 2035, and the transition period needs to be 15-20 years. The projected NZ expenditure costs for Superannuation (Treasury 2016) is actually quite modest, if net rather than gross spending is counted. The only thing that matters is the net cost, and NZ superannuation unlike most other schemes is taxed as income received.
When compared to what most other OECD countries pay for their pensions currently and projected, NZ is very well off. No other country has a NZ Super fund also helping pay for future costs. NZ Super is the great safety net for New Zealanders, universally admired by off shore commentators, and no other alternatives suggested go close. As the guru of NZ Superannuation discussion Michael Littlewood in 2013 said “New Zealand Superannuation (NZS) is one of the simplest, most effective, and most cost effective Tier 1 schemes in the developed world. We mess with it at our peril”. If New Zealand was able to improve its poor productivity statistics, we would not be having a conversation on rising the entitlement age to 67.
If the age was to be raised, there is no requirement to do so for many years, people need time to adjust their finances. We do know that any change, will mean those who fit the label low economic, will continue to utilise the welfare state provisions to live, their chances of finding work post 60 years negligible, and we know the statistics tell us, obtaining work post 60 years strongly favours the educated and well off.
A rising problem for those in the 40-60 years group is they are on the retirement income treadmill, continually being pulled in multiple directions, saving plans in reverse, as they financially support adult children, and also looking after frail parents. Pre-occupied by others needs is the trend for this group, their own retirement savings eroded. This group is aptly called the “sandwich generation”. Work-place pension’s schemes have diminished rapidly over the last 25 years, and defined contribution schemes like Kiwi Saver have camouflaged retirement income gaps. Research suggests that providing child care for those less than 5 years old, is now the dominant responsibility of grandparents. They are also coping with their children not departing the family home and becoming independent, but staying longer (nesting) and an emerging trend of children having experienced study and work experience, returning to the family home in their later years, seeking cheaper living costs. Parental hospitality, parental loans/guarantees to their children are everywhere.
Today’s reality for many parents is they are supporting their siblings financially, detrimentally affecting their own retirement nest eggs. Its imperative parents ensure their own retirement income needs come first, hence the necessity to continue with the current model and be very cautious of raising the age entitlement of NZ Super. NZ Superannuation provides a safety net per excellence, protecting the disadvantaged, sound for women as NZ Super is not linked to paid work, and protecting the elderly from poverty.
Minor adjustments where necessary and a very careful analysis of the Retirement Commissioner review suggestions, with a minimum of 15 years lead in times required, if the age of entitlement was to be raised.
Posted 25 January 2017
The generational argument, often used by NZ commentators Bernard Hickey, in the view of this writer do not stand analysis. Every generation brings strengths, weaknesses, and adjustments, with each at the end of the day balancing each other out. This article contains a useful chart and is worthy of reading.
This 2013 article, contains a sound message for NZ. Pleasing to see the arrival of Life time Income fund onto the NZ scene, to help meet this need, but its time business leaders and Government spokespersons started talking about this. We do not save enough in Kiwi Saver, and the public education of how to deal with lump sums is lacking!
Welcome to 2017. Regular new postings of interest re retirement income issues for New Zealanders will continue throughout the year.
Here is the 2016 Camstar rating for Kiwi Saver products
Posted By Alec Waugh
Kiwisaver, Annuities, and Superannuation Association of New Zealand
The Consumer Voice Protecting Your Retirement Savings
Who are we? We are an independent consumer society committed to discussing and analysing retirement and savings issues and to let Government know what we think is fair and wise and what we think is unfair and unwise
Did you know?
• There have been 14 changes to Kiwisaver since it started in just 2007 (with substantial reductions in entitlements)
• Even NZ Super is not Government tamper-proof
• A number of economic experts say NZ Super is ‘unsustainable’. Is that true?
• There are no Government guarantees or ‘safe havens’ for your retirement savings?
Kaspanz discusses and analyses these issues, posting information and research on our website.
It comes down to this: there are two big goals for retirement—how to fund it and how to protect your savings and entitlements. Where will you be in five, ten, twenty, more years?
New Zealand Super is seen as probably the best in the world (the OECD thinks so); administratively cheap, efficient and effective—and we want to keep it that way or make it better.
But retirement doesn’t start and end with NZ Super. It starts with savings.
NZ Super provides a very basic standard of living. 40 per cent of current retirees have no money other than NZ Super. And around 40 per cent think they have enough to live comfortably. Are you one of the happy 40 per cent?
The first goal is maximising savings; Kiwisaver, which the Government subsidises (to a diminishing degree), is the obvious starting point. There are other choices; e.g. employer subsidised schemes and there are other savings options with varying degrees of risk.
The second goal is protecting your retirement income. The first priority is to discourage the Government from diluting pensions in the future because experts tell them they are ‘unsustainable’. Other options include annuities to make your other savings last: one of the biggest fears is running out of money as life expectancy increases and the money doesn’t. There are options like down-sizing homes, or relocating (including into retirement villages) and reverse mortgages. Not all options are equal.
Who else looks after the retirement interests of New Zealanders?
Answer: No-one really. There is the Retirement Commissioner whose main focus now seems to be on increasing people’s financial understanding. And there is the Retirement Policy and Research Centre at University of Auckland. They do a great job of airing issues and analysing things. But their role does not extend to pressing the Government to look after savers and retirees.
That role falls to Kaspanz. We discuss, we analyse and we tell Government and media commentators what we think.
Come join us! Please register on our member page. We welcome new members and membership is a modest $10.00 a calendar year 1 April- 31 March. Your subscription payment goes towards operating costs, seminars and conferences and representations to Government. Sign up online and send payment to: Kiwibank 38-9015-0111409-00—direct bank transfer, over the counter at Kiwibank, by cheque—whatever is convenient for you.
Please go to our https://kaspanz.com/join-kaspanz-2/> registration page.
Kaspanz was formed in February 2013, as a voice for consumers in the retirement income discussion. Such discussions have previously been dominated either by industry groups, or economists, or on occasion, political parties seeking a tactical advantage. Consumers are defined as those in receipt of, or paying into Kiwi Saver, NZ Superannuation, annuities etc.
Kaspanz adheres to the principles of transparency, fairness and reasonableness, attempting at all times to provide balanced commentary. Financial prudence and safeguarding of consumer rights is espoused.
Two primary concerns behind the formation of Kaspanz, continue to feature. Firstly the regular interference by Government in retirement income policy affects public affects public confidence about future retirement conditions. Government changes/intervention in retirement income policy, takes place too frequently. There is a need for consistency and time to digest change. Serious consideration needs to be given to seeking a cross-party political accord on retirement income policy. This is a trust issue, which political parties need to take account of. Kasapnz is not averse to change, but supports well researched policy adjustments with adequate public consultation: it is wary of ad-hoc amendments.
Where significant change is required Kaspanz suggests long lead in times and/or phased transition arrangements, because not only do people need to adjust saving habits and retirement planning habits, but economic well-being is fundamental to social harmony. A minimum of 10 years is suggested for significant change, with even longer periods of notice or substantial transition elements to be incorporated for changes such as increasing the age of entitlement for New Zealand Super.
Secondly a trend continues of New Zealand media commentators, writing articles about the alleged spiralling costs of New Zealand Superannuation; including negative long-term fiscal projections e.g. out to 2050/2080. Research on the contrary, shows that the New Zealand superannuation model is recognized by many as the best in the world, both simple and low cost in comparison with many OECD countries. Long-term projections are notoriously unreliable; there are unknown factors that occur over time in societies and many variables that can affect economic outcomes.
Kaspanz recognizes the inherent difficulty in projecting a universal voice on key retirement issues, the topic range is vast and the issues often complex and difficult. Accordingly, there will always be differences of approach.
Accepting that there will always be different views, Kaspanz has a role to play through its website in presenting this diversity of viewpoints. The principle however is that Kaspanz wants a voice in the retirement income discussion and, where possible, the topic under examination should take into account research available on the issue, what trends over time periods have applicability, and whether lessons of history have relevance.
KASPANZ SUPPORTS THE FOLLOWING
• New Zealand Super is internationally recognized as a very sound model, and alternative models/approaches fall far short of being viable alternatives. There is no reason why New Zealand Super should not be available for both current and future generations. Discussion on areas like age of eligibility, residency rules and the spousal component of Section 70 issues (overseas pensions) are important, but in essence the approach should be minor adjustments to the model, rather than any major change in the absence of compelling reasons for such change.
• KiwiSaver is a voluntary, largely work-based, savings initiative. While relatively new, it appears to be a sound model. A higher contribution level may be warranted, and whether or not to make participation in the scheme compulsory merits further discussion, with Government underwriting the scheme.
• ‘There is a high level of complementarity between NZ Super and KiwiSaver (or equivalent retirement savings schemes). NZ Super provides for a very basic underpinning of economic welfare in retirement and some form of private savings is essential for a comfortable retirement.’
• Government insurance or guarantee of depositor funds is required.
• Retirement income policy needs to take into account gender issues, e.g. what is the impact upon women, when policy is being set.
• Pension eligibility and portability issues re access to New Zealand Superannuation require attention. E.g. Section 70 of the Social Securities Act needs review. The spousal issue relating to overseas pension deductions and NZ Super is unfair; it is inconsistent with the treatment of other personal income and needs urgent attention. The Social Security agreements NZ has with a number of countries require transparency and monitoring
• Means testing of income and/ or assets is a complex issue. The universality of New Zealand Superannuation entitlement has many advantages.