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Kiwisaver, Annuities, and Superannuation Association of New Zealand

The Consumer Voice Protecting Your Retirement Savings

Who are we? We are an independent consumer society committed to discussing and analysing retirement and savings issues and to let Government know what we think is fair and wise and what we think is unfair and unwise
Did you know?
• There have been 14 changes to Kiwisaver since it started in just 2007 (with substantial reductions in entitlements)
• Even NZ Super is not Government tamper-proof
• A number of economic experts say NZ Super is ‘unsustainable’. Is that true?
• There are no Government guarantees or ‘safe havens’ for your retirement savings?
Kaspanz discusses and analyses these issues, posting information and research on our website.
It comes down to this: there are two big goals for retirement—how to fund it and how to protect your savings and entitlements. Where will you be in five, ten, twenty, more years?
New Zealand Super is seen as probably the best in the world (the OECD thinks so); administratively cheap, efficient and effective—and we want to keep it that way or make it better.
But retirement doesn’t start and end with NZ Super. It starts with savings.
NZ Super provides a very basic standard of living. 40 per cent of current retirees have no money other than NZ Super. And around 40 per cent think they have enough to live comfortably. Are you one of the happy 40 per cent?
The first goal is maximising savings; Kiwisaver, which the Government subsidises (to a diminishing degree), is the obvious starting point. There are other choices; e.g. employer subsidised schemes and there are other savings options with varying degrees of risk.
The second goal is protecting your retirement income. The first priority is to discourage the Government from diluting pensions in the future because experts tell them they are ‘unsustainable’. Other options include annuities to make your other savings last: one of the biggest fears is running out of money as life expectancy increases and the money doesn’t. There are options like down-sizing homes, or relocating (including into retirement villages) and reverse mortgages. Not all options are equal.
Who else looks after the retirement interests of New Zealanders?
Answer: No-one really. There is the Retirement Commissioner whose main focus now seems to be on increasing people’s financial understanding. And there is the Retirement Policy and Research Centre at University of Auckland. They do a great job of airing issues and analysing things. But their role does not extend to pressing the Government to look after savers and retirees.
That role falls to Kaspanz. We discuss, we analyse and we tell Government and media commentators what we think.
Come join us! Please register on our member page. We welcome new members and membership is a modest $10.00 a calendar year 1 April- 31 March. Your subscription payment goes towards operating costs, seminars and conferences and representations to Government. Sign up online and send payment to: Kiwibank 38-9015-0111409-00—direct bank transfer, over the counter at Kiwibank, by cheque—whatever is convenient for you.
Please go to our> registration page.

Kaspanz Principles

Kaspanz was formed in February 2013, as a voice for consumers in the retirement income discussion. Such discussions have previously been dominated either by industry groups, or economists, or on occasion, political parties seeking a tactical advantage. Consumers are defined as those in receipt of, or paying into Kiwi Saver, NZ Superannuation, annuities etc.
Kaspanz adheres to the principles of transparency, fairness and reasonableness, attempting at all times to provide balanced commentary. Financial prudence and safeguarding of consumer rights is espoused.
Two primary concerns behind the formation of Kaspanz, continue to feature. Firstly the regular interference by Government in retirement income policy affects public affects public confidence about future retirement conditions. Government changes/intervention in retirement income policy, takes place too frequently. There is a need for consistency and time to digest change. Serious consideration needs to be given to seeking a cross-party political accord on retirement income policy. This is a trust issue, which political parties need to take account of. Kasapnz is not averse to change, but supports well researched policy adjustments with adequate public consultation: it is wary of ad-hoc amendments.
Where significant change is required Kaspanz suggests long lead in times and/or phased transition arrangements, because not only do people need to adjust saving habits and retirement planning habits, but economic well-being is fundamental to social harmony. A minimum of 10 years is suggested for significant change, with even longer periods of notice or substantial transition elements to be incorporated for changes such as increasing the age of entitlement for New Zealand Super.
Secondly a trend continues of New Zealand media commentators, writing articles about the alleged spiralling costs of New Zealand Superannuation; including negative long-term fiscal projections e.g. out to 2050/2080. Research on the contrary, shows that the New Zealand superannuation model is recognized by many as the best in the world, both simple and low cost in comparison with many OECD countries. Long-term projections are notoriously unreliable; there are unknown factors that occur over time in societies and many variables that can affect economic outcomes.
Kaspanz recognizes the inherent difficulty in projecting a universal voice on key retirement issues, the topic range is vast and the issues often complex and difficult. Accordingly, there will always be differences of approach.
Accepting that there will always be different views, Kaspanz has a role to play through its website in presenting this diversity of viewpoints. The principle however is that Kaspanz wants a voice in the retirement income discussion and, where possible, the topic under examination should take into account research available on the issue, what trends over time periods have applicability, and whether lessons of history have relevance.
• New Zealand Super is internationally recognized as a very sound model, and alternative models/approaches fall far short of being viable alternatives. There is no reason why New Zealand Super should not be available for both current and future generations. Discussion on areas like age of eligibility, residency rules and the spousal component of Section 70 issues (overseas pensions) are important, but in essence the approach should be minor adjustments to the model, rather than any major change in the absence of compelling reasons for such change.
• KiwiSaver is a voluntary, largely work-based, savings initiative. While relatively new, it appears to be a sound model. A higher contribution level may be warranted, and whether or not to make participation in the scheme compulsory merits further discussion, with Government underwriting the scheme.
• ‘There is a high level of complementarity between NZ Super and KiwiSaver (or equivalent retirement savings schemes). NZ Super provides for a very basic underpinning of economic welfare in retirement and some form of private savings is essential for a comfortable retirement.’
• Government insurance or guarantee of depositor funds is required.
• Retirement income policy needs to take into account gender issues, e.g. what is the impact upon women, when policy is being set.
• Pension eligibility and portability issues re access to New Zealand Superannuation require attention. E.g. Section 70 of the Social Securities Act needs review. The spousal issue relating to overseas pension deductions and NZ Super is unfair; it is inconsistent with the treatment of other personal income and needs urgent attention. The Social Security agreements NZ has with a number of countries require transparency and monitoring
• Means testing of income and/ or assets is a complex issue. The universality of New Zealand Superannuation entitlement has many advantages.

Cullen floats ideas for pension funding

Michael Cullen’s proposal for increasing the affordability of NZ Super follows.  It has two main components:  making KiwiSaver compulsory and a clawback of 10 percent of the Government’s incentives at the time of payout, this money going into the NZ Superannuation Fund to ease the cost of NZ Super.  Effectively baby boomers will in large part self-fund the ballooning cost of NZ Super.

Note that the clawback is only from the Government’s contributions (and the interest stream from those contributions presumably);  it does not impose an additional tax on savers’ contributions.  It leaves unanswered the question of ‘time of payout’;  it could be argued many people will draw down from their KiwiSaver as a supplement to their NZ Super.  When does the moment of ‘payout’ arise?  That aside, this looks like the most elegant and viable (Treasury-costed) proposal to date.


Article begins:

Compulsory KiwiSaver and a clawback tax of about 10 per cent upon payout, paid into the New Zealand Superannuation Fund, would cover the rising cost of superannuation, says former Minister of Finance Sir Michael Cullen.

Speaking at a Grey Power Napier and Districts meeting yesterday, the “maturing” 71-year-old superannuate – a recent pacemaker and hearing aid recipient – said family sizes had halved since the height of the Baby Boom and people were living longer, putting pressure on remaining taxpayers.

In New Zealand superannuation was primarily paid for by taxation but, with a general expectation taxes should fall, changing the age of entitlement was “almost the only variable”.

“New Zealanders have persuaded themselves that taxes should go down rather than up.”

The current Government was “dangling the carrot” of tax cuts even though it was not delivering regular surpluses.

Means testing was ineffective and an incentive for people to leave the workforce.

Lowering the amount paid would place a large number of elderly into poverty, especially with an increasing number retiring in rented accommodation.

Changing the age of entitlement was an obvious solution but older people were more likely to vote so were a powerful political force.

The rising cost of superannuation was already affecting government spending in other areas, including infrastructure, mental health and conservation.

“The real issue from Grey Power’s perspective is, will the welfare of young people be affected?”

Treasury modelling showed his proposed tax on Kiwisaver pay-outs combined with compulsory KiwiSaver membership would cover future needs without the need for more general tax.

The pay-out tax would target incentives paid to KiwiSaver members, not members’ own savings, he said.

More than 200 people attended Sir Michael’s presentation at St Columba’s Church in Taradale, which Grey Power president Laurie Jenkin said was a record turnout.

Currently chairman of New Zealand Post, Sir Michael served as Deputy Prime Minister, Minister of Finance, Minister of Tertiary Education, Attorney-General and deputy leader of the Labour Party.

He was architect of the New Zealand Superannuation Fund, colloquially known as the Cullen Fund, which was intended to pay for future superannuation costs, but the National Government suspended contributions in 2009.

Hawkes Bay Today

OECD: Pensions at a Glance 2015

The Organisation for Economic and Cultural Development (OECD) has produced its latest comparative and analytical report of Pensions at a Glance. In terms of non-contributory pension schemes New Zealand continues to head the list (though, arguably, OECD understates the full value of NZ Super as a percentage of average wages). For contributory schemes the picture is not encouraging: for people whose connection to the workforce is tenuous, pension payments can be meagre (though some countries have safety nets to compensate for this) and there is an obvious gender effect (women taking time out to care for babies/children). Interesting reading.

Posted by Michael Moynihan

Further to your message to OECD to be informed when OECD Pensions at a Glance is released:

Just released!

Pensions at a Glance 2015 OECD – Paris, 1 December 2015 – Further reforms needed to tackle growing risk of pensioner poverty, says OECD

Recent reforms have made pension systems more financially sustainable and pensioners have higher living standards than ever before. But future generations are likely to find their pension entitlements much less generous than today’s and many may face a serious risk of pensioner poverty, according to a new OECD report.

Pensions at a Glance 2015 says that about half of OECD countries have taken measures in the past two years to make their systems more affordable in the long term. A third have made efforts to strengthen safety nets and help some vulnerable groups of pensioners.

Retirement ages have risen substantially, with retirement at 67 becoming the new 65 in many countries. Several countries are planning to move towards 70, including the Czech Republic, Denmark, Ireland, Italy and the United Kingdom.

Since the early 2000s, effective retirement ages have continued to increase steadily, especially for women. Employment rates of people aged 55 to 64 years have increased sharply in many countries: from 45 to 66% in Germany, for example, from 31 to 46% in Italy and from 52 to 57% on average across the OECD.

However, significant challenges remain, with population ageing accelerating in many countries partly as a result of changing labour market trends. Many of today’s retirees, at least men, worked for most of their lives often in rather stable jobs. But a job for life or even an intermittent career might not be the norm for people starting out today.

Unemployment rates, especially among younger people, remain very high in many countries, as do long-term unemployment rates among older workers. A decline in jobs with open-ended contracts and the parallel rise in temporary and often precarious jobs are also reducing the continuity of contributions to pensions that workers can claim in retirement.

Time out of work means time out of the pension system in some countries. As a result, many more people will receive lower pensions when they retire, says the OECD.

In light of this likely scenario, some countries need to re assess their safety nets for pensioners who have not contributed enough for a minimum pension. Across the OECD, these provide 22% of average earnings on average, ranging from 6% in Korea to 40% in New Zealand. Some OECD countries, such as Chile, Korea, Mexico, Turkey and the United States, combine relatively high risk of pensioner poverty and low benefits, and should consider increasing the value of safety-net payments. Most countries also index their first-tier pensions to prices, so their value compared to earnings declines over time, as prices tend to increase less than wages. Price indexation is attractive to governments facing budgetary constraints but also runs the risk of fuelling pensioner poverty as safety nets will lose value over time, according to the report.

Pensions at a Glance 2015 also highlights the challenge of the current low-growth, low-interest rate environment for savers and financial service providers offering life insurance and annuities. In addition, the mortality tables used by insurers in many countries do not take fully into account projected improvements in life expectancy. This could lead to pension funds and life insurers seeking higher yields and pursuing riskier investment strategies that could ultimately undermine their solvency. This would in turn jeopardise both current and future retirement income security for many people.

Country-specific highlights on OECD countries and other highlights of the report are available at: