Monthly Archives: August 2015

NEWS SHEET NO 4, 2015

Kiwi Saver, Annuities and Superannuation Protection Association New Zealand Incorporated  The Consumer Voice Protecting Your Retirement Income http://www.kaspanz.wordpress.com

NEWS SHEET NO 4, 2015

This is News sheet No 4 of Kaspanz. The intention is to produce 2 members’ news sheets per annum, chatty, simple and informative. The Kaspanz website https://kaspanz.wordpress.com/ is our primary information tool, but a news sheet always adds value. New sheets are never easy to write, too much detail, not enough detail, material not always interesting, challenging or indeed accurate, one can go on. Comment from readers is welcomed. Snippets of information and comment will be the approach adopted. Information may be placed on the website.

PASSING OF STEPHEN WEALTHALL AND HUGH BLACK

Stephen our webmaster and one of the founding members of Kaspanz passed away July 2015 following a terminal illness. His wit, knowledge, regard for his fellow human beings, passion and commitment to family and values was immense. His contribution to all Kaspanz endeavours was large and the website for Kaspanz was his creation. A tremendous loss. Hugh passed away earlier in the year. He was highly supportive of retirement income issues, also a founding Kaspanz member; he was a very intelligent and committed person, with a strong community focus, and his worldly advice was always calm and sound.

NZ RANKS 2ND FOR WORKING GOLDEN OLDIES

Professional Services Group PCW reported in July 2015, that New Zealand ranked second behind Iceland with the proportion of workers staying in the workforce. The 2nd highest employment rate out of 34 OECD countries with those aged 55-64, and 3rd for 65-69 year olds. Since 2007, 40% of those aged 65-69 were still in work, up from 30% in 2007. Kaspanz notes this tidal wave means they pay tax on their Super, and contribute to growth and productivity, plus many work because they have to, having absorbed marriage breakups, financial disaster, and the reality of trying to save in a low wage economy, with inequality between rich and poor increasing in the decades since the 1980’s. Always remember the high number of those 65 years and older who rely solely on NZ Superannuation for their annual income.

CRISIS RHETORIC OF THE WORST KIND

Bruce Raynor a Republican talked tough about unions and public sector pensions when standing for election in Illinois. Once elected, he toned down the rhetoric. He declares now “that it’s most important to protect what is done – don’t change history. Don’t modify or reduce anybody’s pension who has retired, or who has paid into a system, and they’ve accrued benefits” Kaspanz is pleased to see common sense prevails; retirement income is always a demanding subject, but nobody should be able to look back, and say ‘Hi folks, what you brought into and agreed to years back, we now want to change.’

MICHAEL LITTLEWOOD STEPS DOWN FROM CO-DIRECTOR AUCKLAND UNIVERSITY RETIREMENT POLICY AND RESEARCH CENTRE

Michael’s output and contribution requires acknowledgement. His 2015 paper “The coming debate on New Zealand Superannuation-the review position”, is another example of his writing, which simply and clearly outlines significant issues relating to New Zealand Superannuation. His summary of design issues within the paper extracts all the options, and while politically some could never see the light of day, a thoughtful person could utilise. Compulsory reading for all Parliamentary members!

CUT FEES OR LOSE OUT

Strong statements flowed from Australian $117 billion Future Fund Managing Director David Neal “The margin extracted by the investment management industry are, in general too high, and the alignment with the client, is, in general too low. This follows the Australian Financial system enquiry, led by former Commonwealth Bank of Australia boss David Murray, finding the 2.5 trillion superannuation and funds management industry lacked competition and fees charged by fund managers were too expensive. The inquiry cited costly asset management and active investment strategies as some of the drivers of expenses in the industry.

All the above is consistent from “research” from a range of sources, across OECD countries and a range of sources elsewhere. When you add in the excessive salaries paid to senior Managers and CEO’s in the industry, the magnitude of the problem grows.

There is little contrary evidence to suggest New Zealand is any different, just look at the outrageous salary paid to Adrian Orr of the NZ Superannuation Fund, a competent fellow but receiving a salary which should not have been set by those involved in the process

GREECE PENSIONS

How did Greece allow itself to get into the current position? In 2010 pensions were running at 17.5% of GDP, (NZ 4%). After 2010, attempts began to reduce the excess, with retirement age raised to 67 in 2013. The calculation of pension worth, e.g. the value of the pension in relation to prior earnings was reduced from a crazy 96% to 54%. Interesting to note that only 36% of Greeks work in the age group of 55 – 64 yrs. Examples like this do not encompass the whole picture and can skew perceptions, but when you place into the mix corruption within Greek society and a poor tax collection system, the sins of the past leaders and decision makers are significant.

EXTRACT FROM NORTH SOUTH Magazine AUGUST 2015 EDITION

What do we know about our projections about the future is that they are often so badly wrong, it’s better to call them guesses. In 2003 the Ministry of Economic Development, the Ministry of Social Development and the Department of Labour together published a report titled “Population and Sustainable Development”. Among its projections were that the NZ population would likely grow to 4.4. million by 2012, then reach a peak of 4.6 million by 2051, before declining to 4.2. million by 2101. In June this year our population was 4,595,000 and increasing by about 200 every day, with 3 no sign of slowing down… The principal implications of these reflections are that we should not too readily project the current situation into the future.

Kaspanz has been sceptical from the outset of projections on anything more than 10 years out, let’s hope our economic commentators can factor this into, their so often crisis rhetoric comments on retirement income cost!

LIFE AFTER WORK – READY OR NOT-12 August 2015

A joint survey, released today by the Commission for Financial Capability (CFFC) and the Financial Markets Authority (FMA)

New survey asks how well New Zealand’s older population is planning for retirement A new study shows that almost half of people over 50 years old have yet to figure out how they will reach their retirement goals. While four in ten people who have already retired, did so without a financial plan for their retirement. A joint survey, released today by the Commission for Financial Capability (CFFC) and the Financial Markets Authority (FMA) looked at how well older New Zealanders are preparing and investing for when they stop working.

The survey found that while some people are planning thoroughly for a comfortable retirement lifestyle, others are drifting towards a more frugal future. The research was commissioned to give some insights into the financial challenges and decisions facing New Zealanders, and some possible solutions, as the country’s population ages.

Only one in ten people over the age of 50 are certain they have enough money saved or invested to enjoy the lifestyle they want when they stop working. And of those already retired, a quarter said they do not have the money to do the things they would like in retirement. Among people in the survey approaching retirement, 54% said they had some form of financial plan. However the degree of planning varied, with only about a quarter having planned thoroughly.

Forty-two percent of non-retirees have calculated the regular expenses they would need to cover, and 34% have worked out how much they would need on top of NZ Superannuation to give them the lifestyle they wanted. David Boyle, CFFC general manager of investor capability, said “It’s encouraging to see that almost half of those approaching retirement have done either good or thorough planning, however the research shows that many are leaving their plans to the last minute.”

“There is also a big gap between the reality of lifestyle in retirement and the expectations of the over 50s age group in reaching their goals. At 50-years-old, when you have potentially 15 years to go before you stop working, there’s still time to make a big difference to your lifestyle choices in retirement.”

The experience of those who have already retired showed that while 28% have enough money to do all the things they want in retirement, 25% are just getting by and managing the basics. Retirees who had some form of plan for their retirement were far more likely to enjoy the kind of lifestyle they wanted.

When it comes to investment risk the overwhelming majority, 83%, said that higher risk investments were to be avoided and 71% said that in general people should choose more conservative investments. However only 24% of those surveyed had ever used a risk profile tool to help them think about what level of risk was appropriate for them.

Simone Robbers, FMA director of primary markets and investor resources, said these answers seemed to indicate a gut-instinct approach to retirement planning rather than well-informed decisions. “We can see that if people take time to make a plan, they are generally more likely to choose a more diversified range of investments.”

“It’s essential for people to find out what kind of investor they are and to diversify their investment choices appropriately. That’ll help their investments grow, spread risk and leave them well placed for a better retirement,” said Ms Robbers.

Ms Robbers and Mr Boyle concluded that with so many people now accumulating wealth in KiwiSaver – and other investments – towards their retirement, it’s critical they get hold of the information and tools needed to help plan, prepare and make smarter investment choices. This will help people reach their retirement lifestyle 4 goals andwww.sorted.org.nz is a great place to start. The survey was targeted at New Zealanders aged 50 years or more, including those approaching retirement and those who have already stopped working.

The questions in the survey were designed to cover the kinds of factors everyone needs to consider to help them plan, prepare and make good investment decisions. These factors, in turn, will have a major impact on the kind of lifestyle people have in retirement.

MISCELLANEOUS

KASPANZ SUBSCRIPTIONS ARE DUE

1. As a member or supporter of Kaspanz the time has come to collect the annual $10 per family household fee. This is due now, and the Kiwi bank account for your payment is Kiwi Bank 38 9015 0111409 00.

2. You can pay by any method you wish, e.g. direct debit, telephone, or call into any Kiwi bank and pay your $10.00 directly into account number above.

3. Remember its $10 and put your surname when you pay, so we can identify the payment

*New members need to fill in an application form from our website

Regards to everyone Alec Waugh. alwaugh@xtra.co.nz 094899711 Kaspanz Chair.

Retirement Commission name changes

Kaspanz wrote to the Minister with the query and concern about the  frequent name changes for this organisation  since its inception (3rd name in 4 years).

Kaspanz also asked , whether the public’s view was incorporated into the consultation process ( if any) and  noted the dropping of the words “Retirement Commission” from name changes was unfortunate

Kaspanz remains concerned at the retirement  component being no longer visible, the lack of public input into the change process, but supports the wording “Financial Capability” as being more appropriate than Financial Literacy.

This issue is not a good look for the Commission, and hints of arrogance in the frequency and lack of consultation prior to determining name change!

The Ministers Letter

LETTER – to Alec Waugh – 19 August 2015

Annuities around the world

Good Speaker: Interesting topic:

International guest speaker David Harris, Managing Director, TOR Financial Consulting Ltd: Is New Zealand up with the play? Annuities around the world.

When: Thursday 27 August 2015, 10am to 11.30pm

Where: Room 260-325, Level 3, Owen G Glenn Building, University of Auckland, 12 Grafton Rd, Auckland.

Abstract: Retirement income solutions around the world: how does the retirement income money last? This presentation compares recent thinking and developments on annuitisation and pensions in the UK, US, Chile, South Africa, Australia and New Zealand. What are the options? How effective are the incentives? Given population ageing, should New Zealand rely on a voluntary retirement saving scheme to solve the challenge of decumulation? David Harris will draw on his international experience to offer insights on pension design, retirement savings investment options, annuities and ways to promote security given the inherent uncertainties.

Bio: David Harris is well known in the financial services industries in the UK, USA and Australia as an expert on pensions systems and reform. Prior to founding TOR Financial Consulting he was a senior consultant with Watson Wyatt & Co. in the UK and Watson Wyatt LLP in Washington DC. David has worked with the financial services and consumer protection regulators in Australia and the UK, and worked with the OECD and Irish Government on evaluating how the existing framework can be improved. He has testified several times before the United States Congress on international social security and pension reform. David was awarded the AMP Churchill Fellowship to study “What influences public confidence in the life insurance and retirement industries”. He continues to work on Irish pension reforms with the insurance industry.

To Register, email Dr M.Claire Dale m.dale@auckland.ac.nz