Monthly Archives: May 2015

Kiwi Saver Evaluation Report IRD 2007-2014

Our ever busy Chair, Alec Waugh, has unearthed this overview by IRD of Kiwisaver.

I have paraphrased the summary for brevity and any errors are mine.  Stephen Wealthall

The Link to Executive Summary is HERE and the Link to the full PDF document HERE

  • Both employers and providers were generally supportive of how KiwiSaver had been implemented and employers reported that compliance costs were minimal and decreasing over time.
  • Membership continues to grow with the rate of growth slowing over time, as expected. In recent years, a small majority of new members have “opted in” rather than be automatically enrolled when changing jobs.
  • Up to 56% of members have KiwiSaver deductions taken from their salary and wages and 58% of those members are contributing at the default employee rate of 3%.
  • Fewer people are opting out
  • 38% of members are making no contributions
  • estimated 1/3 of income saved into KiwiSaver is saving not made at the expense of paying off mortgage or other debt.
  • it is estimated Kiwisaver has had no effect on asset accumulation.
  • A 2010 analysis found that KiwiSaver has provided a stimulus to the financial sector. More recent analysis found that the impact on capital markets was small.
  • For the group targeted by the KiwiSaver programme, for each $1 of government spending, the additional savings is estimated to range from $0.20 to $0.38.

Kiwi Saver Budget Cut $1000 Kick start incentive

Kaspanz is disappointed at today’s Government’s decision to immediately stop the Kiwi Saver $1000 dollar kick start incentive.

Consumers want consistency in savings schemes with no surprises, and Kiwi Saver has already been subject too many changes in its history.

New Zealand leads the world with its excellent Tier 1 New Zealand Superannuation model, and the Tier 2 Kiwi Saver Scheme.

Government intervention does nothing to inspire savers confidence.

Consistency and certainty is a pre-requisite for long term savings and pensions schemes, and this latest announcement erodes consumer confidence.

Posted by Alec Waugh

Private and Employer Managed Superannuation Schemes

Despite the introduction of Kiwisaver there are still 457 private or Employer Managed Superannuation Schemes, with 380,000 members in NZ. Between them they have funds of approximatley $20 billion and are a small, but significant, component of the New Zealand retirement income scene.

A handful of schemes have transferred into a Kiwisaver type, where funds are held in ‘lock-in’ accounts for individual members and have a similar degree of protection as Kiwisaver.
The majority of other schemes are based on commercial realities and, with a few exceptions (mainly from Government Service organisations such as Defence, Police, Local Government etc., have no mechanism for beneficiary’s or contributor’s views to influence investment or management of their funds.

The Financial Markets Authority has a statutory duty to oversee Employer and Private Superannuation schemes, and produces an excellent overview of the whole industry each year, including ensuring that a proper annual report is submitted. However FMA’s report does not identify individual scheme’s annual reports, which can only be accessed by going through the Companies Register “Superannuation’ subset search (tick superannuation and at next screen enter ‘Superannuation to the right of  ‘contains the words’).

There appears to be no public discussion of whether the Private or Employer Managed Superannuation Schemes are doing a good job and whether members are satisfied with their management.

I post this information to encourage those belonging to such schemes to give feedback on their experiences or thoughts.

Information sourced from the FMA site and interpretations and comments are my own.

Stephen Wealthall

Annual Reminder on Tone of Contributions

Against some opposition, I made a decision on starting the Kaspanz website, that no style, spelling or content editing of contributions would take place.   HOWEVER this placed the burden of making sure that contributions did not offend customary decencies, on the contributor.   Contributions should echo the style of Parliamentary debate (UK, not Aussie, NZ or PNG), without content that implies personal criticism.

If material does not comply, then the offending parts will usually not be edited, but the whole contribution rejected.

Stephen Wealthall

Webmaster KASPANZ

Martin Hawes views on Home Equity Release (Reverse Annuity Mortgages)

Martin’s paraphrase of  his ‘Sunday Star Times’ article, 26th April 2015, whose copyrights we acknowledge.

Last week we learned that the Reserve Bank has concerns about “reverse annuity mortgages”. These are financial products that older people buy which allow them to re-mortgage the house for cash on which to live. Banks (mostly Heartland and ASB) will lend retired people money for lifestyle purposes. Interest accrues but does not have to be paid in cash; it is added to the capital sum and the whole lot is repaid when the retiree (or her estate) sells the house.
In my view these are great products as they allow people with a valuable house to travel or replace the car. Those who are asset rich but cash poor can stay in their houses and draw on their capital. For some people, the ability to borrow cash in this way will be an excellent choice even though the accruing interest will reduce wealth. Continue reading