Monthly Archives: January 2017

Kaspanz Press Release on Retirement Commissioner recommendation to raise the age of entitlement to NZ Super

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

Generational Chart and comment

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.

 

http://www.theatlantic.com/national/archive/2014/03/here-is-when-each-generation-begins-and-ends-according-to-facts/359589/

Warning re Kiwi Saver: Learn from the Australian mistakes

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!

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10899414