Author Archives: Alec Waugh

NZ Superannuation Research: 2017 paper from economist Bill Rosenberg

2017 Opinion paper

Economist Bill Rosenberg runs the ruler over NZ Super cost predictions, and argues it’s not as scary as we’ve been told; Calls for a proper debate on population policy.

Last month, Prime Minister Bill English announced that his Government now favoured raising the age of eligibility to receive New Zealand Superannuation from 65 to 67 by 2040, a turnaround from its previous denial that any change was necessary. Labour has also reversed its 2014 election policy and now opposes the raising of the age.

The usual reason given for raising the age of eligibility is affordability of the scheme. For example the Commission for Financial Capability (formerly the Retirement Commission) in its 2016 Review of Retirement Income Policies justified it by asserting that in 2015/16 New Zealand Superannuation (NZS) cost 4.1 percent of GDP, and that “Treasury predict that it will rise to 7.1% (net) of GDP in 43 years”.

I have a look at these numbers and find that they are misleading. The picture looks very different if we take into account the tax paid by the New Zealand Superannuation Fund, the contributions both main parties say they will start making to the Super Fund, and the contributions the Super Fund will start making to the cost of New Zealand Superannuation in 2032/33 (according to current plans).

There are further arguments to be considered about the affordability to the public purse of current levels of payment and economic affordability.

The affordability to the public purse is frequently presented as an absolute. But affordability is a matter of priorities, what New Zealand society wants and what it is prepared to pay in the way of taxes. Many other countries are facing the same problem and many have considerably more retired people, and costs, in proportion to their populations than we do.

Economic affordability centres around the ‘dependency ratio’ – the number of people who are working, thereby generating income to be taxed and shared with superannuitants, compared to the growing number of superannuitants. But this does not take into account either other ‘dependants’ such as children, nor Treasury’s most recent long-term projection which did not show a looming economic problem.

Finally, it will become apparent that the question of New Zealand Superannuation cannot be seen on its own: we need to think about matters like New Zealand’s population and other forms of retirement income. I don’t cover these in detail but they are important to gain a full picture.

 How much will New Zealand Super actually cost into the future?

Treasury looked at this question as part of its regular statement on New Zealand’s Long-term Fiscal Position. It released its latest one in November. In it they project current policies into the future to look at the ‘fiscal’ consequences of continuing those policies indefinitely – that is, the effect on government spending and revenue needs.

It shows that it is important not to rely on the headline figures of what the government spends on New Zealand Super. In the year to June 2016, payments to New Zealand superannuitants cost 4.9 percent of GDP or $12.3 billion. The projection shows that by 2060, the period of Treasury’s long-term Statement, it would be costing 7.9 percent of GDP – an increase of over 60 percent, which sounds a little scary.

But New Zealand Super is taxed – so it is actually its net cost after the claw-back of superannuitants’ tax payments that is important. (A Government could easily reduce its apparent level of spending by simply making New Zealand Super tax-free at its current net levels!) Its net cost to the government in 2016 drops to 4.2 percent of GDP or $10.4 billion. In 2060 it would cost 6.7 percent of GDP.

In addition, the Super Fund, set up by the 2000s Labour-led Government to partly fund New Zealand Super in the future, also pays tax. It doesn’t make much of a difference right now (though the $0.5 billion in tax paid in 2016 and $4.6 billion since the Fund started is not to be sneezed at) but by 2060 the tax is projected to be $8.0 billion a year. That brings the net cost by 2060 down to 6.1 percent of GDP.

Then there is the direct effect of the Super Fund. Firstly, both main parties (and the Retirement Commissioner) want contributions to the fund to resume – some earlier than others. The current Government won’t restart contributions until the year to June 2021. From then until the year to June 2033, when withdrawals are started from the Fund, there is an additional cost of up to $3.0 billion (which incidentally isn’t counted in Core Crown expenses because it is regarded as capital spending). In 2021, the total cost to the government of New Zealand Super plus these contributions is projected to be 5.0 percent of GDP. It would have been the same in the year to June 2016 had contributions resumed that year. By 2060, when the Fund is projected to be contributing $4.0 billion to that year’s New Zealand Super costs, the net cost to the government of the day amounts to 5.9 percent of GDP.

So the true comparison of the fiscal cost now and the cost in 2060 is more like this: 5.0 percent of GDP soon, compared to 5.9 percent in 2060. That increase doesn’t look nearly as scary. If it is affordable now (as all seem to agree) then it is likely to be affordable in 2060.

Here’s a table summarising the situation with the total impact on government finances in the bottom line:

Affordability to the public purse It is wrong to present affordability to the public purse as an absolute in the way that English and some others put it: he was raising the retirement age to “ensure the scheme remains affordable into the future” . Affordability is a matter of priorities, what New Zealand society wants and what taxes we are prepared to pay.

The Retirement Commissioner points out that there are other costs that rise as the population ages such as health care. But to draw the conclusion that superannuation should be cut to pay for these is not logical, unless we are moving to a society where each generation is expected to look after itself and not concern itself about younger or older generations.

We do always need to consider our priorities and options, but one option is to raise more revenue. Many New Zealanders would be willing to pay more to maintain the financial security of their parents and themselves in retirement, and for other public services that they value. If the assumption is that the current level of taxation is fixed and can never increase as a proportion of GDP then there are many other problems we cannot address and the outlook for New Zealand is dim.

Some of these problems cannot be addressed by individuals on their own (such as environmental problems, income inequality and poverty). In other cases such as health and retirement income, individuals could pay for it but it becomes inefficient, inequitable and impoverishing (as the US private health system shows). It is much better for everyone if the risks are shared and it is paid from government revenue. It might raise the government’s costs, but from an economy-wide and societal point of view it costs less and is fairer.

We are not a highly taxed country. OECD data shows that we have one of the lowest differences between what an employer pays and take-home pay among the high income countries that make up the OECD – we rank between 28 and 34 out of 34 countries and well below the OECD average. Our tax revenue as a proportion of GDP is low for a small country . We rank 19 out of 35 OECD countries and less than most similar size OECD countries. Our problem is not the level of taxation but its distribution.

The proportion of GDP New Zealand spends on pensions is also low. The OECD put it at 4.8 percent of GDP in 2013 (a misleading figure but it is just a basis for comparison). The OECD average was 6.4 percent of GDP and only 10 out of 33 countries had a lower proportion, including Mexico with zero and others that also have private compulsory contribution schemes. There were 14 already above 7 percent of GDP. New Zealand’s ratio is low partly because we are fortunate to have a relatively young population.

Clearly affordability is a decision that societies make in terms of their priorities.

 Economic affordability

Much of the economic debate centres around the ‘dependency ratio’ – the number of people who are in paid work and thereby generating income and tax revenue, divided by the number of older people. This is projected to fall: fewer people will be working to generate the income required for each retired person. Treasury’s population projections show it falling from 7 working age people to every person 65 or over in 1972 to 4.3 in 2017 to 2.1 in 2060. (That’s taking the working age population to be aged 15 to 65. It’s unlikely that adjusting the lower limit of 15 up a little would make a big difference to the analysis. Statistics New Zealand defines it to be aged 15 years and over.) . Of course the effect of the fall in the ratio will depend on how many people of working age are working (the participation rate), and how many of the over 64s are working. The participation rate is currently rising more rapidly in this age group than any other.

But consider this: people over 64 are not the only ‘dependants’ in society (and an increasing proportion of them are not dependent either). Children make up the other main group of dependants. In 1972 children under 15 made up 31 percent – almost a third – of New Zealand’s population and the 65+ age group only 9 percent. The working age population made up 60 percent. The whole ‘dependency ratio’ was 1.5 working age people to every dependant.

The population is aging in two ways: we have a greater proportion of over-64s and a falling proportion of children under 15. In 2017 the children made up only 19 percent of the population, people of working age made up 65 percent and the over-64s 15 percent. The ‘dependency ratio’ is 1.9. By 2060 the projection reduces children to 16 percent of the population, people of working age 57 percent and the over-64s to 27 percent. The ‘dependency ratio’ would be 1.4 – not much lower than the 1.5 it was in 1972. So in 2017 we are in a sweet spot – the highest dependency ratio since 1972 was in 2.0 in 2006 and we are not far from that. Perhaps this is the unusual time rather than 2060!

The effect of this all depends on the cost of raising, educating and looking after the health of children compared to the costs of old age.

It is interesting that Treasury’s economic projections for the size of the economy do not show an economy struggling to pay for New Zealand Super – otherwise its cost as a proportion of GDP would be much higher. It is of course dependent on its assumptions which may be unrealistic. These include a high proportion of people continuing to work, and in particular among the 65+ age group.

It also assumes that labour productivity grows at an annual rate of 1.5 percent and that real wages (the average hourly wage adjusted for rising prices) grow at the same rate. Productivity has been struggling well below that level for a decade. Wages since the early 1990s have failed to keep up with productivity.

However if the link between productivity and wages were achieved, Treasury observes that raising productivity is not the answer to paying for New Zealand Super: raising productivity raises wages, which raises the cost of Super because it is linked to wages, and we are no further forward without more progressive tax rates.

All of this means that this modelling cannot be the final word on the subject. But it is not immediately obvious that there is an economic reason to reduce the cost of New Zealand Super.

Finally

This discussion raises many questions: the question of New Zealand Superannuation cannot be seen on its own. What would be the impact on its affordability of increasing our future working age population by encouraging people to have more children or a somewhat higher level of immigration (better managed than now)?

We could encourage more children by paying a universal child allowance, making child care better quality and free, and reducing working hours. Treasury says that if it raised its assumed net immigration rate from an average of 12,000 per year to 25,000 per year in the long run (both much lower than at present), “population ageing slows and the population is younger and approximately 928,000 higher in 2060. The higher net migration lowers the ratio of expenditure-to-GDP” and reduces net core Crown debt. These questions add to calls for a proper think about where we want for New Zealand’s future population to head – a population policy.

New Zealand Super is not the only income retired people rely on. We should be thinking about boosting Kiwisaver, and the Retirement Commissioner recommends raising contribution rates. The CTU has proposed making Kiwisaver compulsory if the employer contribution rate was raised to 6 percent, there was a 2 percent contribution from both workers and the government, the minimum wage was increased at the same time, and the government contribution of 2 percent (of minimum wage or benefit level or another amount) applied to all those of working age who are not earning for a period.

We should also be thinking of fair ways to pay for the increasing cost. Susan St John in the Auckland University Retirement Policy and Research Centre has made proposals for a progressive tax on those receiving New Zealand Super but more universal solutions may be less contentious given our history.

There will never be a last word on this subject. We should continue to review the situation, keeping a watch on both the adequacy of our people’s retirement income and the cost of it. But New Zealand is lucky enough that we don’t have to make urgent decisions to manage the cost of New Zealand Superannuation.

Posted Alec Waugh 5 July 2019

2015 Survey: NZ SUPERANNUATION

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).

For media enquiries email s.phillips@auckland.ac.nz

 

 

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”  http://www.lifetimeincome.co.nz

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

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

Kiwi Saver changes 2019

Canstar has provided a timely article, on the recent changes.

Kiwi Saver changes in 2019: What are they?

Posted by Michelle Norton April 1, 2019

Kiwi Saver has come a long way since it launched almost 12 years ago. This year, some pretty significant changes have kicked in including an increase to the options of percentage contributions Kiwi Saver members can make.

Canstar takes a look at what changes have been made to Kiwi Saver, what they could mean for you as an investor and the reasons behind the changes.

 Kiwi Saver contribution options expand to 6% and 10%

As of 12 March, a new law came into effect which means, as of 1 April, Kiwi Saver members can choose to make personal contribution rates at a higher percentage of 6% and 10%.

Kiwi Saver members can now choose to make personal contributions from their base salary at the following percentage rates: 3%, 4%, 6%, 8% or 10%.

This change is a key part of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Bill coming into effect and follows recommendations from the Retirement Commissioner’s 2016 Review of Retirement Income Policy.

Acting retirement commissioner Peter Cordtz welcomes the change to Kiwi Saver contribution rates and says that it will give New Zealanders more autonomy with their savings.

“Adding more contribution rates gives members more flexibility and control over their saving,” Mr Cordtz says

“We’ve had many New Zealanders tell us that the gap between 4% and 8% is too large for those able to contribute more, so they feel stuck on the lower rates.

“Others want the ability to save even more for their retirement.”

Mr Cordtz references IRD figures that show 24% of KiwiSaver members contribute 4% of their base salary but that only 9% of members personally contribute 8% of their salary, “indicating that more might take up a 6% option if it were offered”.

New Zealanders over the age of 65 will be able to join KiwiSaver

Another key change with Kiwi Saver in 2019 is Kiwi Savers over the age of 65 are now able to join the retirement savings scheme and the “lock-in” period has been removed for Kiwi Saver members over the age of 65.

Currently, those who are 60 years of age or older when they join Kiwi Saver have to stay in the scheme for five years before they could withdraw their money.

Mr Cordtz says the “lock-in” period is “inappropriate” for this age group.

From 1 July, this “lock-in period” will be removed and people over the age of 65 will be able to join Kiwi Saver, as a result of the law change.

KiwiSaver contributions holiday gets a name change

As of 1 April, Kiwi Saver members will only be able to take a break from Kiwi Saver contributions for a maximum of one year, down from the previous term of up to five years.

Mr Cordtz says pausing contributions to Kiwi Saver for several years can have a detrimental and long-term impact on investors.

“Not only do members’ accounts not grow by their contributions, but they also miss out on their employers’ contributions, the Government contribution of up to $521 a year, and returns from that money being invested.

“For many people, five years is likely to be longer than necessary and a one-year renewal provides a prompt to reconsider their position and assess whether they can restart saving.”

In the year ending, 31 June 2018, 136,000 Kiwi Saver members were on a contributions holiday. And, under the previous rules, they would have been able to continue this “holiday” for a term of up to five years.

Canstar has written about what to consider before taking a break from contributing to KiwiSaver. You can read that guide, here.

KiwiSaver contributions holiday has been renamed “savings suspension”.

 What should you consider with KiwiSaver in light of these changes?

Now that there are more options are available, you might be thinking it’s time to up the ante with your KiwiSaver contributions.

For some investors, this will make sense and is a great way to do some more enforced savings before your salary even hits your bank account. For others, an increase in KiwiSaver contributions could mean some more serious lifestyle changes and may not be feasible.

Canstar can’t give personalised advice on whether you should increase (or decrease) your contribution rate. However, we do remind KiwiSaver members to do your research and do your own calculations based on your personal financial situation.

With KiwiSaver back in the spotlight, you might be thinking about joining KiwiSaver for the first time, or even considering a change in KiwiSaver provider or fund.

Again, we can’t tell you what the “right KiwiSaver” fund is – that will differ depending on stage of life, appetite for risk and when you plan to withdraw funds, among other factors. But we can present you with different options, to help you compare and contrast what’s available in the market.

As part of the KiwiSaver section of Canstar.co.nz, we offer free comparison tools, so you can weigh up fees and features, to help you make a shortlist.

 

Posted by Alec Waugh May 27, 2019. Kaspanz acknowledges Canstar.co.nz

for the article

 

SUMMIT RETIREMENT INCOME & THE TERMS OF REFERENCE

The New Zealand Superannuation and Retirement Income Act 2001 requires that the Commission for Financial Capability conduct three- yearly reviews of retirement incomes policies. The terms of reference for the review are set by the government.

To mark the beginning of the 2019 review the RPRC held a summit on 26 April at the University of Auckland.The Summit Proceedings : The 2019 Retirement Income Policy Review and You, are available here.

The purpose  of the Summit was to contribute to better understanding of the sector, the issues, and to the importance of the 2019 Review. Based on the terms of reference of the Review, a  wide range of issues were canvassed, including a contribution on international issues and financial institutions chaired by RPRC Research Associate David Harris of TOR Financial Consulting Ltd. We  look forward to the next few months’ debates on the policy issues that will be ​examined in the 2019 Review.We encourage your participation in the Review. You can register your interest by adding your name to the Commission for Financial Capability database.

Terms of reference for the 2019 retirement income policy review

Aspects of retirement income policies the review must address and the topics to be discussed in the Retirement Commissioner’s 2019 report:

  • An assessment of the effectiveness of current retirement policies for financially vulnerable and low-income groups, and recommendations for any policies that could improve their retirement outcomes.

 

  • An update and commentary on the developments and emerging trends in retirement income policy since the 2016 review, both within New Zealand and internationally.

 

  • An assessment of the impact that the following will have on government retirement income policies, including KiwiSaver and New Zealand superannuation:
  1. The changing nature of work, including the increasing number of people who are self-employed and/or working in temporary and flexible jobs;
  2. Declining rates of home ownership; and
  3. Changes in labour market participation of those 65 and older.
  • Information about, and relevant to, the public’s perception and understanding of KiwiSaver fees, including:
    1. The level and types of fees charged by KiwiSaver providers; and
    2. The impact that fees may have on KiwiSaver balances.
  • Information about the public’s perception and understanding of ethical investments in KiwiSaver, including:
    1. The kinds of investments that New Zealanders may want to see excluded by KiwiSaver providers; and
    2. The range of KiwiSaver funds with an ethical investment mandate.
  • An assessment of the impact of current retirement income policies on current and future generations, with due consideration given to the fiscal sustainability of current New Zealand superannuation settings.

 

  • Information about the public’s perception of the purpose and principles of New Zealand superannuation.

 

  • An assessment of decumulation of retirement savings and other assets, including how the Government can ensure New Zealanders make the most of their money in the decumulation phase.

Posted Alec Waugh May 20