At the end of each calendar year, Kaspanz www.kaspanz.com lists the dominant retirement income issues.
Kaspanz TOP 12- RETIREMENT INCOME ISSUES NZ -2015
- The surging upward trend of New Zealanders over 65 in paid work continues, probably due to the fact they cannot afford to retire.
- Future projections for calculating pensions and health costs must recognize the inherent adjustment factor that occurs in society, and the error factor in long term assumptions is very high!
- Longevity and aging of the population is a demographic reality. The topic requires careful analysis and cautious assumptions. Analysis of New Zealand’s population structure for calculating pension and health costs, needs to take into account changes in infant mortality, the increasing adult immigrant population , the effect of increased ‘Lifestyle diseases’ and the very conservative approach New Zealand adopts to end of life issues. Similarly, the tools used to express ‘Life Expectancy’, need to be refined to ensure incorrect predictions, using outdated methods, are not taken at face value. Increasing health costs due to technology and supplier fees and products, end of life care approaches ,elective surgery options , all require public debate
- 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. No realistic alternative approaches to NZ Super have appeared, and only minor adjustments are required.
- Political whim approaches to New Zealand Super, e.g. NZ First Pro-rata and United Future Flexi Superannuation; and Act Party comments on citizen referendums, add limited value to the conversation on New Zealand Superannuation. The evidence clearly shows New Zealand has got it right. Consumers want consistency in retirement income issues, and the first Parliamentary party to accept this, will harness good will and ballot box support
- Senior year people need help in making better use of the wealth tied up in their homes, to support their living options. Family conversations on retirement village issues, reverse mortgages /house equity issues and inheritance approaches need to occur
- Pension eligibility and portability issues e.g. Section 70 of the Social Securities Act needs review and the Social Security agreements NZ has with a number of countries require transparency and monitoring. The spousal issue relating to overseas pension deductions and NZ Superannuation is unfair and needs urgent attention.
- Fees and costs for Kiwi Saver schemes are becoming more transparent and high cost funds rarely perform. Rule of thumb, change to a lower fee provider. The issue of current Kiwi Saver fund contributions not being sufficient needs attention. Remuneration of fund managers is also too high and this issue links to the over payment of CEO’s and senior managers across all sectors. Solutions to this long term trend are required.
- Passive and index funds, generally produce better returns than active funds management over time.
- Annuity options for those exiting Kiwi Saver need attention.
- 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
- Media commentary on retirement income issues, remains traditionally superficial with little historical or trend analysis, a few voices dominate the headlines. Awareness of Scandinavian approaches, and approaches adopted in countries like Canada, Chile and South Africa would be useful additions to the discussion.PS Retirement Policy and Research Centre, Auckland University Business School does an excellent job in highlighting retirement income issues. Susan St John, Michael Little wood and Claire Dale need a round of applause for their efforts! With Michael stepping down, it will be interesting to see what new resource Auckland University puts into the Centre.
Posted by Alec Waugh