Category Archives: Publications

Kaspanz Newsletter No 5

KiwiSaver, Annuities and Superannuation Protection Association New Zealand Incorporated

The Consumer Voice Protecting Your Retirement Income

http://www.kaspanz.com

 NEWS SHEET NO 5, MARCH 2016

The intention is to produce 3 members’ news-sheets per annum, chatty, simple and informative. The Kaspanz website http://kaspanz.com is our primary information tool, but a news sheet always adds value. New sheets are never easy to write, too much detail, not enough detail, material not always interesting, challenging or indeed accurate, one can go on. Comment from readers is welcomed. Snippets of information and comment will be the approach adopted. Information may be placed onto the website.

Sources of Income for older people

The 2015 report on Household incomes, reports the following:

Summary of findings regarding the sources of income for older New Zealanders (2105)

The great majority of older New Zealanders (aged 66+) are very dependent on NZS and other government transfers for their income:

–     40% have virtually no other income source

–     the next 20% have on average around 80% of their income from NZS and other government transfers

–     this degree of dependence has not changed greatly in the last two decades

–     those in couple EFUs tend to have higher per capita non-government income than do those in single person EFUs

–    around one in three older New Zealanders receive more than half their income from sources other than NZS or VP.

–     for this group, the proportion of income from other sources has grown a little over recent years, mainly due to increasing non-government income for those in ‘younger’ couple EFUs (aged 66-75)

CPI 0.1% & NZ SUPER

The annual CPI figure of 0.1% means for those on GSF/NPF annuities there will be no inflation adjustment this year. The threshold for adjustment is 0.5%. The 0.1% figure will accrue along with next year’s CPI and when it gets to at least 0.5%, annuities will then be adjusted.

New Zealand Super is on a different formula; Pension rates will increase on 1 April 2016. The Government has committed to keeping the Superannuation and Veteran’s Pension rates at 66 per cent of average incomes, leading to a 2.73 per cent rise this year.

“This means an increase of $15.74 a week for a married couple, $10.23 a week for a single person living alone and $9.44 for a single person sharing accommodation.

TAMSYN PARKER AND HELEN TWOSE

Look on the Kaspanz home page for Tamsyn & Helen’s icons. Both women write easy to read and commonsense articles. These icons are refreshed with each new article, so go in there regularly. e.g. Tamsin Parker “Baby Boomers retirement wealth a myth, research finds”, and “Savings champion not ready to quite-Focus on the income you will have in retirement”, “Superannuation expert tells” are two examples.

PS Anything written by Diana Clements or Rob Stock is worthy of attention.

 KIWI SAVER CONTRIBUTION RATES TOO LOW

Bruce Kerr, Retiring CEO of Workplace Savings on Kiwi Saver said    “A huge challenge for providers and Government. Kiwi saver Schemes lag behind corporate schemes when it comes to contribution rates from the member and the employee. In many employer schemes members are putting in as much as 5 or 6 percent, and it’s not unusual for the employer to be putting gin 1.5 times the members contribution. This is a combined rate of 12-15% compared to Kiwi Savers 6per cent or 5% once tax is taken off. Everyone has to face up to the fact that the current contribution rate is not enough to deliver a meaningful outcome.

ALLOCATED PENSION: LIFE TIME RETIREMENT INCOME http://www.lifetimeincome.co.nz

An interesting scheme has arrived on the New Zealand market (December 2015). Similar to an annuity, it targets the 65 year plus age group, minimum lump sum investment of $100,000 and is a combination of both capital and insurance, producing a guaranteed fortnightly sum from an invested lump sum. It has received accreditation from both IRD and the Reserve Bank requirements, with former AXA CEO Ralph Stewart leading the team, with a strong Board. The target market is obviously seniors and Kiwi Savers exiting with lump sums. Worth a look!

KIWI SAVER WITHDRAWAL PROVISIONS IN RETIREMENT

Mary Holm column advises the following providers in Kiwi Saver schemes offer regular withdrawal provisions, for retirees post 65 years: AMP, ANZ, ASB, Civic, Fisher, Grosvenor, Kiwi Wealth, Medical Assurance, Milford, NZ Anglican Church, Support Life and Westpac.

 NEW SHAREMARKET WEBSITE

https://www.shareclarity.com/ is a newcomer on the NZ investment scene. Offers Free membership, this is their marketing blurb. Welcome to Shareclarity, your portal to better understanding the share markets. Shareclarity is a first-of-a-kind information platform that provides fully transparent and independent company overviews and share price valuations to over 75 NZX-listed companies’ .If you’re new to Shareclarity, you might like to

  • Click the “View All Companies” button above and find a company that interests you
  • Read what the company does, explore its key value drivers and see how much its shares could be worth
  • Compare different companies, chat with other users, vote on and propose changes to a company’s earnings forecasts
  • Discuss your views with your advisor before trading any shares or including them in your self-managed Kiwi Saver portfolio

DEBT

Diana Clements (Oct 17, 215 NZ Herald)  “the University of Otago found that much of the debt-fuelled spending by students, supposedly one of the poorest groups in society, wasn’t on essentials and their use of credit cards wasn’t a last resort. The researcher also found that “impulsive consumption” is growing in the 18-25 year old group. The trend is wider than younger kiwis. When people in their 40s and 50’s would in the past stay in their family home until it was time to downsize, these days as soon as there is some “spare equity” it’s time to trade up, either to a new house or for a renovated or extended existing home. They are no longer satisfied with what’s achieved.

Kaspanz notes the average square metre home size in New Zealand has doubled in the last 30 years, helping to increase house prices.  Associate professor Stuart Locke of the Waikato Management School believes middle aged attitudes are also changing, because of greater awareness of lavish lifestyles and the availability of easy credit. We all want to live in a palace whether we can afford it or not

OVER 65’S WORKING

Professor Paul Spoonley notes in a 2015 article “seniors over 65 are working longer, especially here in New Zealand. More than 20% of over 65”s are still in paid work, compared to 12% in the UK and 10% in Aussie. Commentators note the increasing tax take and high purchasing power working Kiwi’s over 65 provide.

DIVORCE: DOLLAR COSTS

OPINION: Do you know what the GST club is? It’s nothing to do with tax and everything to do with divorce. A financial friend once told me he’d been halved by his first wife, had a quarter left after the second wife and was down to 12.5 per cent of his wealth after the third. You need to be old enough to recall the 1989 rate of GST to get the joke. How about RAIDs?

That stands for Recently Acquired Income Deficiency Syndrome. It’s a pre-divorce tactic to lower your partner’s expectation in a divorce settlement. Sneaky. That along with other tell-tale signs such as having no explanation for missing money, making cash withdrawals and reducing contributions to retirement plans are all possible signs your spouse wants a divorce.

Dollars cause divorce 

The Americans in particular seem to survey anything that moves and spread forth the scary stats.

One study of 4500 couples found arguing about money was the only predictor of divorce for men.

Women had a few more gripes. One pundit quoted in The New York Times claimed the odds of finances causing a marriage to fail were 45 per cent.

In February 2015 American bank SunTrust found 35 per cent of people with relationship stress blamed money. If you are in the age group of 45-55 years, almost half said money was the primary cause.

Late for a very important date

Figures from Statistics New Zealand show 42,660 couples got divorced in the last five years .In people-numbers, that’s over 85,000 of us sliced in half financially. Spook-alert; 13 years is the mean duration of a marriage ending in divorce. Back in the first half of the 1950s fewer than 8000 couples split. New Zealand’s spike occurred in 1981, the year Charles and Diana tied the knot, with 12,395 divorces (3500 more than the 2014 year). Let’s blame the Springbok tour or the underarm bowling for that one. Tensions were high.

The financial trouble for most Kiwis is not the volume of divorces (apart from the infamous GST-club), but the demographics. We are divorcing later. The median age in 2014 was 46 for men and 44 for women .Back in the 1980s it was 37 and 35 respectively. In short, the later we leave it the harder it is to bounce back financially. The demographics have moved almost a decade. That’s a lifetime in the investment world .It’s possible to double your money in that frame. In our mid to late-40s we should be paying off the tail end of a mortgage and pressing the accelerator on savings. We need a 15-year run of turbo-saving to avoid financial stress at 65.

Divorce in your 40s isn’t financially fatal, but it’s certainly a crash that puts you in critical condition. If it’s doomed, “sooner rather than later” would be the clinical advice. Even better advice is to “make it work”. Even high-income earners will find it difficult to recover the wealth and lifestyle they had. Don’t rely on marriage number two, either. The American statistics tell us those have a 60 per cent failure rate and marriage number three a 70 per cent failure rate. It’s a slippery slope into that GST club. Don’t blame it on the money One of the smartest things I’ve read recently is “nobody gets divorced over money”. The statement makes you baulk and mutter “yeah right”. A relationship guru called Kevin dared to say it and he explained money arguments are only a symptom of an underlying disease. That disease tends to fall into one of four categories; poor communication, selfishness, addiction or poor coping skills.

Janine Starks is a financial commentator with expertise in banking, personal finance and funds management.  Opinions in this column represent her personal views. They are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product.

Posted by Alec Waugh

Chair
alwaugh@xtra.co.nz