Kiwisaver: may not let you say no.
Filed under: Cost of living, Property & General Investing, Retirement, Pensions and Kiwisaver
It seems discussions are underway to “auto enroll” the million workers who have not yet done as they were supposed to do and enrolled in Kiwisaver. Now if you start a new job, you are automatically enrolled, and you have to opt out: that takes time, and in that time you lose a % of your salary until such time as the IRD give it back.
But for the million people who have not signed up voluntarily, and have not changed jobs so been swept up in the automatic enrollment – apparently – that’s not what you were supposed to do – and time could be up to behave and do as you are told!
Sometimes I do wonder how we can possibly be allowed to make any of our own choices anymore.
It is one thing to make Kiwisaver compulsory – and I personally object to being forced to invest in a way I do not want to, but its another to sit there pretending you have choice in the matter, and then clubbing you round the head with a big stick cos you didn’t make the “authorised” choice.
I get that many people are not savvy about investing. Hell, even those of us that think we are, probably aren’t. But should you be forced to put your money in an investment you think is a really bad one? Clearly a lot of the people not enrolled are there because they just didn’t bother. Many of them may not mind being auto-enrolled. But at a time when the cost of food and fuel are rocketing should we really be saying that you now have to work through the process of opting-out in order to not lose 3%+ of your wages?
There are 1.75 million people in KiwiSaver now but another 250,000 have opted out of the scheme.
But it is likely the opt-out rate would be much higher under an auto-enrolment plan, perhaps as high as 40 per cent to 50 per cent.
“The Government is looking at how we can auto-enrol those people who are in the workforce but currently not in KiwiSaver,” he said. The Government’s Savings Working Group had looked at compulsion but had shied away.
“They rejected it on the basis that it wouldn’t necessarily suit every person’s circumstances. Low-income people might find it quite challenging to go in there . . .” Mr Key said.
I am also a bit tired of the belief that only low income people are affected by losing a % of thier salary. When the kiwsaver contribution was 4%, it would have cost us over $500 a month to enroll. We could not afford to lose that. And bear in mind that with a lot of companies, you also need to fund the employer’s contribtion out of you salary (how the hell is that legal???) you can be stuffed!
Enrolling more people in the scheme may not lift national savings, because they may save less in other areas.
Saving what I wonder?
Labour leader Phil Goff said his party was looking at ways to create a more “universal savings scheme”, but he refused to give details.
KiwiSaver had been universally available, but not universally taken up, he said.
There were problems extending it to everyone, because many people did not have spare cash to put into savings.
“There are a whole lot of New Zealanders that are struggling just to meet the day-to-day bills, that actually don’t have the ability to put money aside for savings.”
I actually think that may the first time I have agreed with what Phil Goff says.
Can I have my 62c back please?
Filed under: Economics, General Budgeting, Hubby's Views, Immigration Advisers, Life in New Zealand, Retirement, Pensions and Kiwisaver
I was browsing through some news articles on Kiwiblog and came across this one about Govt income & expense. Which is talking about the Where’s My Tax? website, using figures from this weeks budget.
Which is quite a fascinating resource..
Top right of the page you can switch between income (taxes) and expense (public spending) .
One of the wow! factors for me was the single biggest Govt expenditure:
NZ Super (Pension). At $2173 per person per year.
Second place goes to Treasury debt servicing, at $829 pppy Our collective revolving credit facility costs us all $829 a year. hmm, that seems like an awful lot of money doesn’t it?
Primary education comes in third at $620 pppy, that’ll be all those ‘voluntary’ contributions.
With Secondary & Tertiary education each getting $455 pppy, more ‘voluntary’ contributions then! 
DPB, at $430 pppy, comes a long way behind as the second biggest MSD expense, after NZ Super.
One of the buried slithers (actually the second smallest) on the income page is Dept of Labour, showing this income;
Yes. The effective income from immigration ‘advisers’ is 22c per year. The effective income from giving someone Residency, ten times that.
But wait, lets look at the expenses shall we?
So this is just a list of the bottom half of DoL expenses. 62c a year to run the IAA.
I don’t think these numbers are any different from what has been previously posted. Presented in a fascinating way though.
You don’t save when you have debts to pay.
Filed under: Avalon's Money Thread, Economics, General Budgeting, Interest Rates, Credit Cards & Mortgages in NZ, Property & General Investing, Retirement, Pensions and Kiwisaver
It is a fundemental rule of personal finance and budgeting:
Do not save while you have debt to pay off.
So why is it that the supposedly “clever” people in the savings working group want to force people to save because we have too high a level of debt? It makes no sense, in fact its the most stupid and finacially dangerous idea you could come up with. The scary thing is – they have to know this – they really can’t be that thick – so why are they suggesting it?
First of all- why is it a bad idea?
Well, its all to do with interest rates. You get less interest for saving than you pay for borrowing. For example, ASB pay you 3.65% for any savings you have, and charge you a minimum of 6.25% for any borrowings you have. (Up to 19.25% if you have credit card debt with them). So WHY would you put any money in the savings account when it can work at least twice as hard for you paying off the debt?
And because you pay tax on any of the interest that you earn – you are even worse off. The simple fact, to earn enough interest to make it worth “saving” (or “investing” ) instead of paying off debt you need to be able to earn that 6.25% AFTER THE INCOME TAX HAS BEEN PAID. That means you need to earn about 8% interest in savings or investments.
Anyone know where you can get that?
(Actually – First Direct in the UK are currently offering 8% on thier regular savings account – but that aint gonna help most Kiwis, or expats unless you already have an account with them).
So – Forced Kiwisaver then?
Yep – thats the bee-all and end-all of everything. Open a Kiwisaver account and the economy will fix itself. You won’t be able to eat – but hey – who cares about that? We will stop using debt to buy things we can’t afford, and no one will have any money to plow into investment properties because it will all be in the stockmarket. NZ Business needs the investment – and as too many of us are not doing as we are told – we need to be forced to behave.
A classic quote in a second article today shows the attitude of these people really eloquently I think:
“KiwiSaver has considerable potential to further help people select appropriate investment assets,” the working group report said. “At the moment this potential is not being fully realised.”
Ie – “stop thinking you know better than us – we tell you Kiwisaver is the best investment – and if you won’t believe us – we will force you to. You are too stupid to select your own shares and we really are terribly hacked off that you want to buy property – because none of us get a cut of that!”
Of course, buying shares, unless you buy in an Initial Public Offering never actually puts money into a business – it just values the business. Which means that on paper the business is worth more and can borrow more. Um – isn’t that bad and greedy when Property Investors do it? It will of course put money into the pocket of the person you bought the shares from. Much like buying a property off someone who bought it as an investment puts money into the greedy gits pocket!
The first rule of smart finances:
Pay off your debt first.
It’s the best form of “saving” there is, purely because of the cost of borrowing and the effect of compound interest. If you want to try and beat the interest rate you are paying on debts, then you tend to have to save the money in risky investments, or property (and that as we all know is BAD!) And even then – it isn’t easy – and is dependent on a lot of outside forces. Investments can and do lose money – because money always goes in cycles. Theres are booms and busts – in a boom your investment goes up, in a bust it goes down.
But one easy way to get the best return on money is paying down debt. It’s risk free, makes the absolute most of every pound or dollar, and also reduces your personal risk. Can you get a better investment for your money than that?
Does this include mortgages?
Yes and no. In general when people talk about “debt” they mean non-mortgage debt. But clearly when you end up in the middle of a financial crisis like we are right now, mortgage debt is also a huge issue for people, so I personally think you can’t forget about it that easily. And when the boffins in these working grups are whining about our debt levels – they are also talking about mortgage debt. Most of our mortgages are business related, so they are tax deductable – effectively this brings the interest rate down by about 1/3. (which would be exactly the same if we have taken out the loan to buy shares with by the way). But it should never be forgotten that they are still debts, and they cost a lot of money to service. It is in the end money we owe. To be honest – if we didnt have the investment properties then financially we would be laughing all the way to the bank because our spending is way lower than earnings right now. All our spare money is going into paying down debt and keeping our properties.
If we are forced to pay Kiwisaver contributions as well – how the bloody hell am I supposed to pay the mortgages and reduce debt levels???
I may be good with money – but I am not that good!
I will be writing another blog about this, and what the Savings Working Group actually said in full, because from the skim read I have had – there are some really good ideas in there. Just some truly barmy ones as well, and an arrogant insistance that I MUST have a Kiwisaver account.
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Should you be forced to save?
Filed under: Banks, Cost of living, Economics, Property & General Investing, Retirement, Pensions and Kiwisaver
Forced savings – in the form of compulsory superannuation (or – shudders – compulsory Kiwisaver) is back on the agenda in new Zealand. Because apparently, not enough of us are doing as we are told and opening up Kiwisaver accounts. So we need to be made to do it.
This comes out of the Tax Working Group, now we have to pay some more academics to sit around and tell us how we need to save for retirement and how we need to do it. I hope they get different people from the ones that just beat the living crap out of any Kiwi that was using Property to try and fund their retirement. Apparently that doesn’t count as retirement planning, cos it’s not shares or managed funds.
So when they talk about “Forced Savings” just be aware that what they really mean is “Forced Stock Market Investments”.
I’m not impressed – if you couldn’t tell. 
I personally believe that forcing people in a low wage economy like this to give up at least 2% of their after tax salary is just not on. The “theory” is that if we all do this – then it will cause investment in businesses (through the sale of shares) to increase, and those businesses will then be able to pay the staff more.
Anyone actually think your wages are gonna go up?
Because heres the thing (speaking as a complete non-economist here of course):
Buying shares on the stock market does not actually put money into the business. It puts money into the pocket of the guy selling those shares. If that just happens to be the company floating shares – then yeah – you just invested money in that company. Otherwise, some guy on the street sold some shares and you bought them.
BTW, we recently found out that if you work for one of the banks, which just happens to be a “Default Provider” of Kiwisaver (where you money sits if you don’t bother to actively choose a fund), they take their “Employer contributions” out of you salary. So basically, they don’t actually contribute to their own staff’s Kiwisaver fund.
Why is this not illegal, and why is it still being allowed? And how the hell does such a company get to run a default fund???
So regretfully – still not a fan of Kiwisaver, and would still like the government to keep its grubby little paws of my money thank you very much!
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Is Income Splitting coming to New Zealand?
Filed under: Cost of living, Economics, Retirement, Pensions and Kiwisaver
It seems that a bill has been selecting for reading in Parliament which would allow single wage families to split that income and therefore pay less tax. Note the word families. Apparently me and hubby do not “count” as a family because we don’t have children. And Peter Dunne – “party leader” of United Future ( party of 1 MP – but hey – he gets a Party Leaders expense allowance and salary!) believes that you are only a family if you have Children.
Git.
I quite liked the sound of Income Splitting, until it was linked to ability to have children. (And is anyone else slightly confused that on the one hand we have Politicians saying you can only have more tax cuts if you have children at the same time we are threatening to throw someone out of the country for being pregnant???)
I personally don’t think this will go anywhere, because it does advantage those on higher incomes, and thats almost always seen as a bad thing for anyone except those on the high incomes. And besides – we have already had a raft of tax cuts, and as far as I’m aware the NZ government is still saying that tax cuts have to be paid for by equal tax increases.
But doesn’t income splitting already exist in New Zealand?
You may hear this from some people – we certainly did. Over and Over again. But it actually doesn’t. In order for one single income to be diverted to more than the person who actually did the work to earn it – you have to jump through a whole load of legal and accounting hoops to keep on the right side of the Tax Man. And you need to be self-employed. And thats always the side of the Tax Man you want to be on.
Theoretically, some of Hubbies contracting income could be diverted to me, and therefore he would earn less and pay less tax. But, its not that simple: because he does the work that brings in the money, he has to earn the bulk of that income in his own name, otherwise we are using tax rules to avoid paying tax, which isn’t legal.
So if I was to take some of that contracting income, as a wage for myself, then the amount I get has to reflect the contribution I make to earning that income. As my contribution is running this blog – which doesn’t make us any money- and doing the paperwork for the business, which doesn’t earn any income but is a necessary job, I can hardly “earn” the same amount as Hubby, and thus split the income down the middle.
So bringing in a bill to allow Income Splitting on the whole sounds like a good plan. I’m all for less taxes and I think its about time that people should be able to access the same tax cutting measures as employees that the self- employed can. I just think its wrong to link tax to ability to have children.
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The Inland Revenue is sitting on HOW much of our money???
In the Dom Post yesterday was a short piece about the Unclaimed Monies department at the Inland Revenue.
It seems that if money has been sat untouched in banks, businesses or insurance policies for more than 6 years, it gets given to the Inland Revenue for safe keeping. They keep a list of all the people involved and how much, but you have to know its there and claim the money.
They currently have over $5,000,000 sitting there.
Now it wont affect any new Migrants because you wont have been here long enough to have funds lost in a bank account anywhere. We have only been here 5 1/2 years (exactly today as it happens). But It the kind of thing I really detest about the IRD so i felt it worth blogging about. Because there something I just don’t get.
There IRD has the most extraordinary powers to chase unpaid taxes. They have huge resources to chase you and track you down. So why are they relying on you to know about their web page and tell then to give you your money back?
Most of the amounts we are talking about a re a few hundred dollars. But some people have ten or twenty thousand stuck in there. This is not small fry!
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Will KiwiBank become an AussieBank.
Filed under: Banks, Property & General Investing, Retirement, Pensions and Kiwisaver
There are rumours that the NZ (National) government are thinking of selling some State Assets. Which for many people is the worst thing a government can do and brings out all sorts of diatribes. I’m in two minds about it myself – I think it’s good to have assets – even if you are country, but also you have to be prepared to sell them if they are basically not working for you, or you are in financial trouble. There’s just no point having a boat load of shares looking pretty if you cant afford your mortgage this month.
But when it comes to government assets – a whole load of issues come up. Which as far a my admittedly not-politically-astute mind can grasp comes down to Labour wont sell them – National will. In fact just prior to the financial world crash – the NZ government at the time (Labour) went so far as to buy back KiwiRail which had previously been privatised and was failing, at a massively over inflated price of $690m when it was worth about $369m.
So the first head on the chopping block this time round looks to be KiwiBank.
Now I’m not sure of all the pros and cons of the case – but what I can tell you is I’m pretty bloody disgusted at the sheer amount of bunkum being spouted about the effect this would have on new Zealand if it was sold. It’s a bit like the plonker who said that if we used credit cards we would lose our sovereignty to Australia. The way the opposition is talking it up – a float of KiwiBank and sales of shares to New Zealanders will ensure that KiwiBank is owned by the Aussies. Or even worse – in the hands of greedy “foreigners”.
And thus – ordinary Kiwis will lose out on something that they own.
But here’s the thing:
Firstly – if the Shares in KiwiBank are sold to Kiws – then it will only end up in the hands of “greedy foreigners” if the Kiwis sell the shares to make a fast buck. So who would really be the greedy ones?
Secondly – do Kiwi’s really “own” Kiwibank? If we do – where the hell are the profits we should be sharing in? The government gets a cut – which technically I guess Kiwis get back in the form of government spending – but c’mon! That hardly the same as being a shareholder and having a stake in the company – or getting dividends.
Thirdly, we also “own” most the electricity companies in New Zealand, or rather as with KiwiBank the government owns them. And how are rewarded? With ridiculously high electricity prices which just go up and up and up while the companies we “own” make more and more profit. Its estimated that we have been overcharged by the electricity companies we “own” to the tune of $4.3 Billion in the past 5 years. Hmm – yes – ownership of companies via the government is really working for us.
So all in all – when you hear about the horror of selling national assets – don’t necessarily believe what the papers are telling you. If you disagree with privatisation – fair enough. But just take a moment to wonder if you are being fed a line that is somewhat an exaggeration. That’s not to say that selling KiwiBank (or anything else) is a good idea. Just that it wont cause the destruction of life as we know it.
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New Kiwisaver Rules: what the hell?
Accepting that I am not a fan of Kiwisaver – I am a little bit gobsmacked about new rules that the government have brought out, ensuring that Kiwisaver Providers:
are to have a direct duty of care to their investors and will have to provide regular updates on their investment performance, fees and asset allocation.
Ummm – you mean they don’t currently have to do this?
Thats outrageous! After all the problems that people have had in the last year or two losing all their money, a new scheme didn’t write in these rules in the first place?
It seems there is currently about $5bn invested in Kiwisaver funds. Thats a helluva lot of money that people have put into the hands of providers when it seems they don’t have a duty of care to the people investing with them. And it doesn’t say much for them them this had to be written into law, rather than them just behaving properly off their own backs.
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Mixing investing and immigration – is it sensible?
Filed under: Economics, NZIS & Immigration issues, Property & General Investing, Retirement, Pensions and Kiwisaver
Well, if you are the government of New Zealand trying to wangle investment funds out of foreigners – hell yeah!
If you are a retirement-age person with a million or so in funds that survived the economic meltdown? Ummm- not so much.
The thing that concerns me about both these policies (Parent Retirement and Temporary Retirement Categories) is that they are basically Investor Policies under a different name. And people need to be crystal clear on something:
you could lose that money.
The New Zealand Government are NOT guaranteeing that the investment funds will not lose value.
Now the upside is that you could make money out of this: but the investments are share market based – and there is risk involved here. My concern is that in general people coming up to retirement age are advised to move funds from shares into less risky investments to avoid the peaks and troughs you get with the share market.
As far as I know – the only really “safe” option is the government bonds – and that really isn’t much more than a straight bribe to the government in my opinion.
So my advice is this: if you are looking in anyway at either of these two policies – make sure that you take some stringent financial advice and you know what you are doing. Unless of course you really do have squillions sitting in the bank and you are just bored stiff staring at your large bank balance everyday.
If you are relying on those funds being there in full after the 2 or 4 years you have to tie it up – be very careful.
Share investments we have can cope with the ups and downs – we have time for things to correct. But think about this:
What would you have done if you had invested in this policy 5 years ago, and needed to take what was left of your $1,000,000 about 12 months ago?
This isn’t about Immigration Advice – its about financial advice. There’s a lot of money at stake here, and you need to ensure you don’t lose the lot.
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Kiwisaver Problems: keep your eye on your provider.
Filed under: Avalon's Money Thread, Cost of living, General Budgeting, Property & General Investing, Retirement, Pensions and Kiwisaver
I always thought putting the Inland Revenue in charge of Kiwisaver was a daft idea. Seems I may have had a point. The IRD passes on your information to one of the default providers, and then thats the end of what they care about. It seems that a lot of the default Kiwisaver providers (these are the ones you are automatically enrolled with if you don’t make your own choice), have got the wrong information, and cant get in contact with the people whose funds they are running.
It worries me that there appears to be an awful lot of people who are completely unaware that they have a Kiwisaver fund. There are 200,000 people who cannot be contacted by their fund managers.
The problem means people may not receive the letter telling them who their KiwiSaver provider is or the annual statement on their Kiwisaver balance and annual report explaining the returns of their fund.
McAllister [from ASB Group Investments - the larges Default provider] said some people could be in KiwiSaver for more than a year and still not know because it was new and they did not know what to expect from their provider or Inland Revenue.
“It appears it’s an IRD problem. It raises questions about how accurate IRD’s information is.
You need to be aware about Kiwisaver. You are automatically enrolled into a fund, whether you like it or not, and have to opt out if like us you think Kiwisaver is crap.
Make sure you understand what is at stake here – as immigrants you will face this the minute you start a job,a dn you have 2 weeks to make up your mind about staying in Kiwisaver forever or opting out. Do your homework.
More information on Kiwisaver can be found in Avalon’s Guide: 13 things you need to know, and 17 things you really need to know!
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