Save now for likely pen­sion tight­en­ing

Auckland City Harbour News - - OPINION -

What would you have done with all that money, had Ki­wiSaver never been in­vented?

Re­search sug­gests just un­der a third of peo­ple’s con­tri­bu­tions (31 per cent) would have gone on ‘‘daily spend­ing’’.

That means Ki­wiSaver has en­cour­aged some ex­tra sav­ing which is just what the Labour gov­ern­ment which in­vented it wanted.

Roughly another third (32 per cent) would have been used by peo­ple to re­pay debt like re­duc­ing the mort­gage, or pay­ing off the credit card. That’s not so good. En­cour­ag­ing peo­ple to carry in­ter­est-bear­ing debt for longer might make banks happy, but it wasn’t among the of­fi­cial aims of Ki­wiSaver.

The rest of the money saved into Ki­wiSaver would have been saved or in­vested any­way.

That re­search was done by sur­vey for the In­land Rev­enue Depart­ment. It’s not a ring­ing endorsement of Ki­wiSaver.

It in­di­cates, how­ever, what a big ef­fect on your house­hold fi­nances gov­ern­ment re­tire­ment pol­icy can have.

And the bug­gers keep chang­ing things on us.

When plan­ning, I find my­self mak­ing spend­ing and sav­ings de­ci­sions based not only on cur­rent pol­icy, but my guesses on what politi­cians will foist on us in the fu­ture.

Ki­wiSaver does seem to have brought sav­ings dis­ci­pline for about half of Ki­wiSavers who wouldn’t have been oth­er­wise sav­ing.

That’s good, as the tax-cut mer­chants have their knives out for New Zealand Su­per.

At the mo­ment we have a uni­ver­sal, non-means tested NZ Su­per on which old folk can just scrape by, pro­vid­ing they own their own home.

Even at the cur­rent lev­els, many peo­ple be­lieve NZ Su­per is not sus­tain­able, mean­ing they don’t think fu­ture gen­er­a­tions of vot­ers will put up with pay­ing for it at cur­rent lev­els. That’s be­cause the pop­u­la­tion is age­ing, and there will be more older folk for work­ing folk to sup­port.

The spec­tre of cuts to NZ Su­per, the rais­ing to 70 in the age you get it, and even means-test­ing have all been raised.

The Re­tire­ment Com­mis­sioner has even talked about the pos­si­bil­ity of gov­ern­ments around the world tap­ping the eq­uity in peo­ple’s homes to help pay for their state pen­sions!

I ex­pect the first change to be the lift­ing of the age peo­ple get NZ Su­per.

I imag­ine the fu­ture politi­cian who an­nounces it will tell peo­ple that Ki­wiSaver money will still be avail­able at age 65.

I hear him or her say­ing the Gov­ern­ment can’t af­ford to pay for early re­tire­ments.

Peo­ple who want that lux­ury should spend their Ki­wiSaver money on it.

To me, the most likely fu­ture of NZ Su­per is that it re­mains as a uni­ver­sal pen­sion paid alike to pau­pers and mil­lion­aires, but I ex­pect it to be paid later, at a lower real amount.

Those who can’t carry on work be­fore the new age of en­ti­tle­ment will have to live on their sav­ings, or go onto a mea­gre ben­e­fit.

Peo­ple who want equiv­a­lent liv­ing stan­dards to to­day’s su­per­an­nu­i­tants will have to save more, and start sav­ing ear­lier.

This out­look puts me among the Ki­wiSaver cyn­ics, who don’t look at Ki­wiSaver and see re­tire­ment sal­va­tion.

But they do har­den the re­solve to scrape, scrimp, save, in­vest, and pay off the mort­gage dou­ble quick so that what­ever that fu­ture politi­cian an­nounces, the blow will be soft­ened.

Ki­wiSaver cyn­ics see Ki­wiSaver as play­ing only a part in pre­par­ing them for the un­cer­tain fu­ture.

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