NZ Super Changes

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#2407535 27-Jan-2020 14:04

GV27:

tdgeek:

We can't save for our own individual retirements as per my suggestion, although oddly, many are happy to pay into Kiwisaver. yet when I suggest that, all hell breaks loose

I suspect the framing of the Kiwisaver debate will change given a decent market shock and people see their balances shrink by 20% in a month or similar. Almost none of the 'how much do you need to save' calculators factor in a recession or likely market drop into their long-term forecasts, which is borderline misleading tbh. And if you're a long time away from retirement, that Kiwisaver deduction might as well be a tax. It's almost dead money but not quite - just very abstract income in the sense that you're being taxed on it now but you can't use it for decades.

I would rather be paying that 4% from my salary directly to the Government to use as they see fit rather than being forced to ride the markets by law. Maybe that is the product we are missing from the debate - guaranteed, inflation-adjusted crown-backed annuities to be paid out regardless of means or other income.

I guess we could have a Kiwisaver where its not invested, it is saved and the Govt pays interest. For long termers, you could also use the current KS investment options, but in the last 10 years you go to save with the Govt plan? Removing investing altogether would make it very easy to manage, but probably a lot less lucrative, but at least no shocks at the wrong time in your life

GV27

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#2407541 27-Jan-2020 14:30

tdgeek:

I guess we could have a Kiwisaver where its not invested, it is saved and the Govt pays interest. For long termers, you could also use the current KS investment options, but in the last 10 years you go to save with the Govt plan? Removing investing altogether would make it very easy to manage, but probably a lot less lucrative, but at least no shocks at the wrong time in your life

Less lucrative in terms of overall returns perhaps, but I struggle to see how people will be better off in the long run given the fees charged by providers and the low return environment we currently live in.

Like I say, I suspect we'll end up having this debate after a decent economic shock and after people have seen a big chunk of their savings disappear overnight.

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#2407549 27-Jan-2020 14:47

GV27:

tdgeek:

I guess we could have a Kiwisaver where its not invested, it is saved and the Govt pays interest. For long termers, you could also use the current KS investment options, but in the last 10 years you go to save with the Govt plan? Removing investing altogether would make it very easy to manage, but probably a lot less lucrative, but at least no shocks at the wrong time in your life

Less lucrative in terms of overall returns perhaps, but I struggle to see how people will be better off in the long run given the fees charged by providers and the low return environment we currently live in.

Like I say, I suspect we'll end up having this debate after a decent economic shock and after people have seen a big chunk of their savings disappear overnight.

Yes, but in the meantime they bleat on about how fast it grows.

Safer to bypass all that I guess, and go super safe with Govt interest rates

Handle9

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#2407769 27-Jan-2020 20:42

This is getting dumb.

There is very clear evidence that over the long term superannuation funds generally perform well and add economic value for their unit holders. Take a look below. There will be short term shocks, which is why it is important to understand risk profiles of different funds.

If you need to pull your money out in the next ten years you should be looking to move to a more conservative fund. Guess where a conservative fund invests? Government bonds and term deposits.

If you want to grow your asset base you have to take some risk, it is inescapable. There will be years that the market will crash, just as there are years with double digit growth. This is how investing works. It doesn’t mean we shouldn’t invest it means we need to be sensible.

Compulsory superannuation schemes greatly benefit their economies. They provide both wealth for the people saving but also grow the available capital within a country. This makes the countries economy more robust and provides investment capital. The NZ superannuation fund has generally been good for our economy IMO.

https://www.superguide.com.au/comparing-super-funds/super-funds-returns-financial-year

GV27

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#2407875 28-Jan-2020 06:51

Handle9: This is getting dumb.

Compulsory superannuation schemes greatly benefit their economies. They provide both wealth for the people saving but also grow the available capital within a country. This makes the countries economy more robust and provides investment capital. The NZ superannuation fund has generally been good for our economy IMO.

https://www.superguide.com.au/comparing-super-funds/super-funds-returns-financial-year

The NZ Superfund has been, yes. But Kiwisaver products aren't the NZ Superfund.

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#2407876 28-Jan-2020 06:53

GV27:

Handle9: This is getting dumb.

Compulsory superannuation schemes greatly benefit their economies. They provide both wealth for the people saving but also grow the available capital within a country. This makes the countries economy more robust and provides investment capital. The NZ superannuation fund has generally been good for our economy IMO.

https://www.superguide.com.au/comparing-super-funds/super-funds-returns-financial-year

The NZ Superfund has been, yes. But Kiwisaver products aren't the NZ Superfund.

Sigh. The link I added was all Australian super funds over 27 years.

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#2407898 28-Jan-2020 08:18

Handle9:

Compulsory superannuation schemes greatly benefit their economies. They provide both wealth for the people saving but also grow the available capital within a country.

While that's true, there's also a risk of "regulatory capture". It wouldn't be good if - for reasons of political expediency - regulators went soft on corporate governance because keeping corporates honest would impact on voters' super balance. It wouldn't be good if governments influenced policy settings - with risk of creating unsustainable asset bubbles - for the same reason.

OTOH if the government collected and invested citizen's money in a separate fund - there's no guarantee that because of some "economic shock" they'll find good reason to help themselves.

It's funny how raising super entitlement age and means-testing is a thing on one hand, and the same hand sometimes talks about UBI as a solution to increased wealth disparity and poverty.

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#2409824 29-Jan-2020 19:12

Fred99:

Handle9:

Compulsory superannuation schemes greatly benefit their economies. They provide both wealth for the people saving but also grow the available capital within a country.

While that's true, there's also a risk of "regulatory capture". It wouldn't be good if - for reasons of political expediency - regulators went soft on corporate governance because keeping corporates honest would impact on voters' super balance. It wouldn't be good if governments influenced policy settings - with risk of creating unsustainable asset bubbles - for the same reason.

OTOH if the government collected and invested citizen's money in a separate fund - there's no guarantee that because of some "economic shock" they'll find good reason to help themselves.

It's funny how raising super entitlement age and means-testing is a thing on one hand, and the same hand sometimes talks about UBI as a solution to increased wealth disparity and poverty.

What corporate governance? This is New Zealand where the regulator basically does nothing.

GV27

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#2409981 30-Jan-2020 08:21

Handle9:

Sigh. The link I added was all Australian super funds over 27 years.

I missed the link - didn't highlight on my screen for some reason.

I suspect there's probably another key to the Aus industry's success - their contribution rates are way higher (and coming off a higher base). We're not in the same league by comparison.

Just to clarify, my main issue with the current Kiwisaver set-up is the fees incurred by commercial funds and market uncertainty - not the merits of super schemes (or state-run superfunds).

God help us if they allow withdrawals to buy investment property.

Fred99

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#2410009 30-Jan-2020 10:00

Handle9:

Fred99:

Handle9:

Compulsory superannuation schemes greatly benefit their economies. They provide both wealth for the people saving but also grow the available capital within a country.

While that's true, there's also a risk of "regulatory capture". It wouldn't be good if - for reasons of political expediency - regulators went soft on corporate governance because keeping corporates honest would impact on voters' super balance. It wouldn't be good if governments influenced policy settings - with risk of creating unsustainable asset bubbles - for the same reason.

OTOH if the government collected and invested citizen's money in a separate fund - there's no guarantee that because of some "economic shock" they'll find good reason to help themselves.

It's funny how raising super entitlement age and means-testing is a thing on one hand, and the same hand sometimes talks about UBI as a solution to increased wealth disparity and poverty.

What corporate governance? This is New Zealand where the regulator basically does nothing.

"The strict policing of our world-leading legislation has been an overwhelming success. It has created such a strong deterrent effect that since establishment of the office 30 years ago, not one case of naughtiness has been prosecuted"

Fred99

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#2410012 30-Jan-2020 10:04

GV27:

God help us if they allow withdrawals to buy investment property.

They shouldn't have allowed KS withdrawals for home deposits in the first place.

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GV27

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#2410014 30-Jan-2020 10:15

Fred99:

GV27:

God help us if they allow withdrawals to buy investment property.

They shouldn't have allowed KS withdrawals for home deposits in the first place.

I bought a house using my FHB withdrawal. It wasn't going to happen without it. Should I have spent years more paying increasingly higher rents while I saved up the equivalent in cash because my actual earnings were locked away for four decades?

Fred99

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#2410023 30-Jan-2020 10:33

GV27:

Fred99:

GV27:

God help us if they allow withdrawals to buy investment property.

They shouldn't have allowed KS withdrawals for home deposits in the first place.

I bought a house using my FHB withdrawal. It wasn't going to happen without it. Should I have spent years more paying increasingly higher rents while I saved up the equivalent in cash because my actual earnings were locked away for four decades?

No you shouldn't have. House prices should never have been allowed to escalate such that it would be unaffordable for people to save a deposit.

clevedon

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#2410067 30-Jan-2020 10:44

Fred99:

GV27:

Fred99:

GV27:

God help us if they allow withdrawals to buy investment property.

They shouldn't have allowed KS withdrawals for home deposits in the first place.

I bought a house using my FHB withdrawal. It wasn't going to happen without it. Should I have spent years more paying increasingly higher rents while I saved up the equivalent in cash because my actual earnings were locked away for four decades?

No you shouldn't have. House prices should never have been allowed to escalate such that it would be unaffordable for people to save a deposit.

It's a free market, we don't need more regulation - less would even be better.

House prices in large cities wordwide are all doing the same thing, how would you stop just only NZ's prices being unaffordable - you can't.

Fred99

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#2410075 30-Jan-2020 11:09

clevedon:

It's a free market, we don't need more regulation - less would even be better.

House prices in large cities wordwide are all doing the same thing, how would you stop just only NZ's prices being unaffordable - you can't.

It's not a "free market". It's heavily regulated. If it was a "free market", then I'd be able to buy the section next door to yours, and erect a camp of tiny homes made out of old pallets and banana boxes.

House prices worldwide are not "all doing the same thing". NZ is amongst the worst for unaffordability due to price increases over the past couple of decades.

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