Monthly Archives: June 2019

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

https://www.stuff.co.nz/business/113409891/can-new-zealands-superannuation-age-remain-at-65

 

Posted by Alec Waugh June 14

KIWI SAVER THOUGHTS

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?

FOR

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.

AGAINST

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.

VERDICT?

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