Monthly Archives: June 2019


Most in advanced age rely on pension

16 April 2015

A survey of people in advanced age has shown that for most people (89 percent), New Zealand Superannuation is the main source of income.

The University of Auckland study, funded by the Ministry of Health, also shows a significant difference between Maori and non-Maori people reporting that the NZ Superannuation (NZS) pension is their only source of income.

Twice as many Maori (41 percent) as non-Maori (21 percent) reported the NZS as their only income.

These findings are from a population-based sample of 937 people – Māori (aged 80 to 90 years) and non-Māori people (aged 85 years) – living in the Bay of Plenty and taking part in a longitudinal study of advanced ageing.

The study is called ‘Life and Living in Advanced Age: a Cohort Study in New Zealand – Te Puāwaitanga O Ngā Tapuwae Kia Ora Tonu’, (LiLACS NZ).

The latest LiLACS NZ short report presents key findings about the main sources of income, how people felt about their money situation, and the entitlement cards they had in advanced age.

“People receiving only the NZ Superannuation were more likely to feel they could not make ends meet, “ says study leader, Professor Ngaire Kerse from the University of Auckland. “ And fewer Maori than non-Maori felt comfortable with their health situation in advanced age.”

Almost all the people in advanced age surveyed had a SuperGold Card, but fewer Maori than non-Maori had a High Use Health Card.

Significantly fewer Maori (six percent) received superannuation from other sources as well as the NZS, compared with 14 percent for non-Maori.

It was the same pattern with income from investments (Maori 28 percent/non-Maori 65 percent), but as would be expected, more Maori (32 percent) received tribal land trust money than non-Maori, (two percent).

NZ Superannuation was the only source of income for more women than men, and significantly fewer non-Maori women received NZS or other pensions. Non-Maori women were also more likely to receive financial assistance from family than non-Maori men.

The majority of people in advanced age (75 percent) were comfortable with their money situation with 25 percent saying they had just enough to get along and one percent saying they could not make ends meet.

These perceptions were significantly related to source of income and all of those who could not make ends meet, had NZS as the only source of income.

More people who felt they had just enough to get along, relied solely on NZS for income (50 percent) than those who reported that they were comfortable (30 percent).

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Interest rates: The cash rate is 1.50 per cent at the moment, but 1.25 per cent is likely by August?

This article is courtesy of “Life time Income”  NZ website”

Why interest rates refuse to rise…

Nowhere in the Reserve Bank of NZ (RBNZ) official policy objectives is there any mention of making life easier for retirees.

That was made clear once again in May when the RBNZ, in a surprise move, dragged the official cash rate (OCR) down another 0.25 per cent from its long-held historical low of 1.75 per cent.

Term deposit (TD) investors – many of whom are retirees – no doubt experienced a familiar sinking feeling on the latest OCR news.

Deposit interest rates have been in freefall since the 2008 global financial crisis (GFC) as central banks around the world cut furiously to avert a financial system meltdown.

We are a long way from the heady pre-GFC heights where TD returns hit 8 per cent or more in New Zealand.

New Zealand interest rates, in fact, fared better post-GFC than many other developed world countries where respective counterparts of the OCR tumbled close to zero; some central banks effectively took rates into negative territory via modern ‘money printing’ techniques known as ‘quantitative easing’.

But our relative good fortune holds little cheer for retirees pondering how to make a lifetime savings pot go a little further each week.

More than 10 years out from the GFC, most central bank interest rates – and with them bank deposit returns – remain depressingly low. The RBNZ downward move in May was in tune with offshore sentiment where our nearest neighbour, Australia, is expected to cut – perhaps up to 0.5 per cent – this year from its current 1.5 per cent level.

Similarly, the US Federal Reserve, which sets the tone for the rest of the world, reversed direction this year from a rate-hiking mode (it raised four times in 2018) to hold, with many observers expecting cuts ahead.

The current downbeat positioning of the RBNZ and other central banks is linked to a forecast slowing in the global economy over the year ahead.

In summing up the rationale for the May cut (and hinting at more to come), RBNZ governor, Adrian Orr, said “a lower OCR now is most consistent with achieving our objectives and provides a more balanced outlook for interest rates”.

Until recently, the RBNZ’s only monetary policy target was to keep inflation in a range of 1-3 per cent over the medium term “with a focus on keeping future inflation near the 2 percent mid-point”.

Following a series of reforms last year, the RBNZ now must also formally consider “supporting maximum sustainable employment” when setting the OCR.

While the employment requirement has muddied the OCR waters somewhat, the inflation part of the equation still dominates.


Inflation has remained stubbornly low since the GFC – for reasons economists are yet to fully decipher – with few expecting its rapid return.

For example, the May OCR statement notes “it was agreed that inflation expectations remain well anchored at the mid-point of the target range” with some risks that it could go higher… or lower.

As the RBNZ notes: “A period of lower inflation may then have a persistent effect on pricing behaviour, dampening inflationary pressure for a prolonged period.”

In short, don’t expect interest rates to revert to the pre-GFC historical patterns any time soon.

The low-rate trend – while beneficial to borrowers now – leaves risk-averse savers, which includes a large chunk of the retiree population, in a quandary.

Following the May OCR, for instance, term deposit rates fell again: according to online publication Interest, New Zealand’s major banks are offering TD rates of between 2-3.25 per cent stretching out at almost the same level for all periods up to five years.

Of course, tax could wipe up to a third off those meagre TD returns for many retirees.

With TD yields shrinking, a growing number of other investment products – such as forestry, commercial property and mortgage funds – have launched aggressive marketing campaigns offering higher, but still single-digit, returns. But as survivors of the 2006 New Zealand finance company collapse will recall, higher returns carry higher risks.

Others are using the OCR doldrums to promote the virtues of shares.

A recent Stuff article, for instance, notes that “while our bank accounts slow to a halt and run out of steam, the return on investment on the share market is continuing to provide a good return”.

“The OCR decrease is one way the Reserve Bank encourages Kiwis to get investing…,” the article says.

While the argument has its merits for those with a long investment time horizon, retirees have good reason to be cautious about chasing the seemingly-endless bull market run.

Clearly, it’s getting tougher for retirees to manage solely through a DIY investment of TDs. In this low-rate era professionally-managed solutions, such as the Lifetime Income Fund, which carefully balances income and investment risk over time frames appropriate for retirees, look increasingly attractive.

And unless the government adds a new clause requiring the RBNZ to consider the retirees, the OCR won’t be riding to the rescue in a hurry.

Posted by Alec Waugh 21 June

Retirement Commissioner Diane Maxwell parting shot: Hit and miss?

Diane stepping down this month,  as Retirement Commissioner,  from what could only be described as “unsatisfactory performance”  (can anybody forget the 2 name  re-branding exercises,)  has left the building with a few comments, shown below.

The age of eligibility for New Zealand’s superannuation must rise, says outgoing Retirement Commissioner Diane Maxwell. 

“For all of us, for our children and our grandchildren, we need to do it.”

On TVNZ1’s Q+A, Ms Maxwell said changing the age of NZ Super should not be thought of as going up from 65 to 67, instead, “we need to think 50 to 70”. 

“People get into their fifties in very different shape, physically and financially. We need to be investing in people in their fifties, raise the age of eligibility for Super.

“It’s not the retirement age. Forty-four per cent of people keep working past 65, so invest in people in their fifties, give them what they need for another however many years of work.”

Ms Maxwell thought “we will get there in the end” on means testing for NZ Super. 

“Raising the age is a no-brainer. I think we should leave indexation alone, and I think we will get to means test.”

However, barriers to raising the age included politicians “looking down the barrel of vulnerability” and needing the voter to “take some responsibility”. 

“The Government gets caught up in today, voters get caught up in today.”

“It takes a step of courage to say, ‘This might not look pretty, let me explain it, let me explain why it matters’… for all of us, for our children and our grandchildren, we need to do it.”


Susan Edmond’s replied to the comments  as shown below


Posted by Alec Waugh June 14


If you are 65 or over, from July 1 you can join or rejoin Kiwi Saver,  a lack of information currently on how the Kiwi Saver providers will market this change!

Susan Edmund’s provides some thoughts on Kiwi Saver generally.

KiwiSaver:  Should it be your retirement savings plan?

Susan Edmunds  April 02 2019

New rules introduced this week mean you have more Kiwi Saver options.

As of Monday, you are no longer limited to automatic contribution rates of 3 per cent, 4 per cent or 8 per cent of your pay. You now also have the option of 6 per cent or 10 per cent.

But just because you can save more – should you? And is Kiwi Saver the best way to save for retirement?


It is a truth universally acknowledged that putting money aside for retirement is a *good thing*.

The earlier you start, the more you will save by 65 – and the more compounding will do the work for you, reducing the proportion that actually has to come out of your pay.

KiwiSaver has some clear advantages over most other schemes.

Your employer has to give you a contribution of at least 3 per cent of your pay if you’re in the scheme and you’ll get the member tax credit of $521 if you put in at least $1042 a year.

Fees are generally lower than other managed funds. Economies of scale, and more competition, should push them lower still.

The contributions are managed out of your pay before you see them and then investment decisions are made by a fund manager whose job it is to get you the best return for your risk profile. You do nothing.

If you’re looking for a way to save, KiwiSaver is a pretty cheap and efficient way to do it.

Should you put aside more money in KiwiSaver each payday? Switching to a higher contribution rate will make a big difference.

Aidan Vince, head of KiwiSaver at ASB, said a 30-year-old earning $50,000 who shifted from 3 per cent to 4 per cent contributions would end up with more than 10 per cent extra saved at 65.

Someone who switched to 6 per cent would end up with $24,000 a year in income from KiwiSaver compared to $17,000 at 3 per cent.

Your money is locked away and is hard to access. Unless you’re buying a first home or in serious financial hardship, you can’t touch it until you are 65, so there’s no temptation to dip in.


But hold on, there’s been nothing to stop you putting extra, voluntary contributions in to your Kiwi Saver account already – and how many people actually do that?

Kiwi Saver money is locked away, so allocating too much of your pay to the scheme could be seen to be a bit risky.

Moving to 10 per cent contributions might be intimidating if you know the money is inaccessible for years to come. You could instead continue saving 3 per cent and put the remaining 7 per cent somewhere else.

Why put away more of your money into the scheme than your employer will match? If you have a mortgage, you might be better off diverting any available cash to paying that off. If you have high-interest consumer debt, that should definitely take priority.

The Government has rolled back lots of the original incentives to being in the scheme, anyway. And while employers say they offer 3 per cent contributions, increasingly that’s being negotiated as a “package” so if you aren’t in Kiwi Saver you end up with 3 per cent more money in our bank account.

It’s hard to get as much individual control over your money in Kiwi Saver as you’d have if you invested in something such as direct shares or a rental property. Craigs Investment Partners offers a “select your investments” option – but this isn’t common.


Get some personalised advice on the right thing to do with your money to help you end up better off in the long-term.

Any money or time you can spend now on preparing for retirement should leave you better off post-65.

Posted by Alec Waugh 10 June 2019