Category Archives: NZ Super

nzs

No frills retirement plus!

Research out of Massey University, NZ. The costs of retirement!

Most people in NZ apart from the educated few, have no choice but to try and find work as they anticipate retirement. NZ Super keeps them above the poverty line, but life challenges, including financial meltdowns, marriage breakups, no discretionary income at any stage, takes away the choice element for most!

http://www.massey.ac.nz/massey/about-massey/news/article.cfm?mnarticle_uuid=06AADB95-1221-4755-BE16-499F76E21C41

Posted by Alec Waugh

The case against Raising NZ Superannuation age of entitlement

This 2017 article is a timely reminder re both the substance and complexity of New Zealand Superannuation. Contains some excellent references,  and always be aware of the single issue commentator and those who adopt crisis rhetoric on the topic. Its a worry when you hear Larry Williams, Mike Hosking, Heather du Plessis Allan and Cameron Bagrie talking on this  and similar issues. Limited knowledge and loud voices!

Here is hoping the Retirement Commissioner is developing an extensive body of knowledge on the topic she and her team must be research experts on NZ Super and comparative analysis  details, aware of what’s sound and what’s unsound in OECD countries , Chile, Scandinavian  and similar.

 

Posted b y Alec Waugh 6 July 2018

 

 

https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11814349

Kiwi Saver: New Zealand Superannuation: The New Zealand Superannuation Fund

Can someone please explain the difference between KiwiSaver, The New Zealand Superannuation Fund and New Zealand Superannuation?

KIWI-SAVER was introduced by the Government in 2007 to help New Zealanders save towards their retirement. To help you save, the Government will make an annual contribution towards your Kiwi Saver account (member tax credit) as long as you are a contributing member aged 18 or over. Member tax credit ceases when the member reaches the age of eligibility for NZ Super (currently 65) or has been a member for 5 years, whichever is the later. To get the full member tax credit automatically “you” have to contribute at least $1,042.86 a year

Employees: You can choose to contribute 3%, 4% or 8% of your before-tax pay. If you don’t choose an amount, the default rate of 3% will apply.

Non-employees

If you’re not an employee – for example, you’re self-employed, a contractor, not working or receiving a benefit, then your contribution rate will be set out in the contract you have with your Kiwi Saver provider. There may be a minimum annual sum, or specific payment periods that apply, such as monthly or quarterly.

“Individuals can start a Kiwi Saver account in their own name and take it with them from job to job. “Kiwi Saver is not guaranteed by anyone, including the Government.

“The Government is responsible for setting the rules and regulations for providing a Kiwi Saver scheme. “Providers are supervised by independent trustees and the Financial Markets Authority exercises continuing oversight of the schemes.

Oct 24, 2013 – In the report the Retirement Commissioner acknowledged that while private savings, including Kiwi-Saver, will play an increasingly strong part of people’s retirement income, these should be a supplement rather than a replacement for NZ Superannuation’s modest payments.

NEW ZEALAND SUPERANNUATION (NZ SUPER) is the government pension paid to Kiwis over the age of 65. Any eligible (if you receive an overseas pension, this is important) New Zealander receives NZ Super regardless of how much they earn through paid work, savings and investments, what other assets they own or what taxes they have paid. NZ Superannuation is taxable income

THE NEW ZEALAND SUPERANNUATION FUND (NZSF) was established in 2003 to help pay for the future costs of superannuation entitlements.

Estimated to cover about 10% of future costs and to reduce the tax burden on future New Zealanders for the cost of New Zealand Superannuation

The NZSF invests money on the Government’s behalf and the fund is managed by a crown entity – the Guardians of New Zealand Superannuation

Posted by Alec Waugh 1 February

2017: The Dominant retirement income issues for New Zealand

At the end of each calendar year,  we list what we see as the  dominant New Zealand  retirement income issues.

KASPANZ :  TOP RETIREMENT INCOME ISSUES NZ2017

  1. New Zealand Superannuation is the safety net for all retirement income planning. The model is very sound, efficient, effective, reasonable costs, excellent for women, and keeping the elderly from poverty. The costs of New Zealand Superannuation over time are often exaggerated. The simplicity of the current model of NZ Superannuation, and its universality is acknowledged as a world leader. Minor adjustments only are required, as and when they surface. The evidence clearly shows New Zealand has got it right.
  2. Longevity and aging of the population is a demographic reality. The topic requires careful analysis and cautious assumptions. Longevity is increasing, but note the last few years of life may be impaired health, with a probability of a critical illness ( e.g. cancer, stroke, heart, prostrate, Alzheimer’s ) affecting many, and the ability to work an issue. Different implications for different groups apply when longevity is discussed. Longevity for some groups is lower than others!
  3. The surging upward trend of New Zealanders over 65 in paid work continues, probably due to the fact most cannot afford to retire. However it’s the educated that benefit mostly from this trend, and the hurdles to find work post 60 years, are considerable. Those most likely to need work later in life are the least likely to find it.
  4. Consumers want consistency in changes to retirement income issue policies, and long lead in time to any proposed changes. The first Parliamentary party to accept this will harness good will and ballot box support. A task force similar to the Tax working Group 2010 would assist all political parties to make sound public policy choices re retirement issues.
  5. Kiwi Saver supports New Zealand Superannuation, and is a sound savings model. The default schemes should strongly consider an age related asset bias. Consideration should also be given to Government guaranteeing the scheme.
  6. Fees and costs for Kiwi Saver schemes are more transparent. This trend must continue.
  7. Passive and index funds, generally produce similar returns to active funds. When lower fees for passive funds are factored in, schemes following this approach should be a favoured option. Predicting in advance the performance of active managers is impossible, and with their fee structure normally higher and effecting returns over time, the client aware principal applies.
  8. Buying an annuity or similar product upon retirement or following receipt of post Kiwi Saver lump sums and drawing an income from it, makes sense. A Kiwi Saver provider has recently introduced the first Kiwi Saver annuity product.
  9. Rental accommodation issues need review. Housing needs are changing and the standard length of term and the issue of short term leases is just an example of matters requiring attention. A national Housing symposium or similar would be helpful.
  10. Future projections for calculating pensions and health costs must recognize the inherent adjustment factor that occurs in society, and the error factor in long term assumptions is very high!
  11. Failure to Launch. The trend of parent’s supporting adult children with financial assistance continues unabated, yet this is severely affecting retirement years savings
  12. Current trends are parents subsidising children in various way, including significant child care for under 5’s, housing loans and early inheritance gifting. Parents homes are becoming, a place of return by siblings 20-45yrs following divorce or early work experience. These costs are carried principally by parents.
  13. Health topic requires both transparency and discussion. Chronic illness across all age groups, and the end of life costs (last 6 months all age groups) dominate costs. Increasing health costs due to technology and supplier fees and products, elective surgery options, and increasing the take up of private insurance require public debate.
  14. Senior year people need help in making better use of the wealth tied up in their homes, to support their living options. Conversations on retirement village issues, reverse mortgages /house equity issues and inheritance approaches, need visibility and increasing discussion.
  15. Pension eligibility and portability issues e.g. Section 70 of the Social Securities Act needs review and the Social Security agreements NZ has with a number of countries require transparency and monitoring. The spousal issue relating to overseas pension deductions and NZ Superannuation is unfair and needs urgent attention.
  16. New Zealand is one of the few countries that neither insures nor guarantees bank deposits, instead adopting the moral hazard principle, “make wise choices”. This is poor policy and needs to be changed. This is one occasion when we should follow the Australian example       Editor comment: Media commentary on retirement income issues, remains traditionally superficial with little historical trend analysis, or comparative research. Fullmark’s to Mary Holm, Susan St John, Rob Stock, Martin Hawes, and Brian Gaynor for their thoughtful approach. Awareness of Scandinavian approaches, and approaches adopted in countries like Canada, Chile and South Africa would be useful additions to the discussion. A task Force on Retirement Income is a must