Listen up, Winston – Nats the smart choice
Sharemarket performance
Dear Winston, Let’s be upfront. I care about money. You care about people. And most people care about money, so that’s what links us.
Another admission; I’d like you to choose National. There’s no point me pretending to be purple. Columnists are never neutral and I’m not about to be the first.
I’m bored with utu, middlemen, synthetic carpets, mavericks, fat-cats, golden parachutes, pension leaks and shipping containers. I bet you are, too. While it would make a good episode of House of Cards, it doesn’t tend to be the fictional, petty or granular parts of politics that have a material impact on the wealth of real people across the country.
But while you’re holding that deck of cards, there’s certainly no reason why you shouldn’t shuffle and cut the blue and red decks to get what you want. They’ll both offer you a good bounty and mend bridges.
Individual policies are important, but they won’t be your legacy. That legacy is already firmly set and it involves a lifelong fight for pensioners.
By all means, maintain a poker face and negotiate hard with both sides, you’ve earned that right. But remember where your core is. National have more chance of delivering an economic environment that supports the highest retirement incomes for every New Zealander.
Here’s the numbers. Over 81⁄ years, the fifth Labour Government aligned with sharemarket returns of 154 per cent. In dollar terms company values went from $100,000 to $254,000 with dividends reinvested. The fifth National Government delivered returns of 225 per cent over 8.8 years, turning $100,000 into $325,000.
These numbers eliminated the period of June to November 2008, as the global financial crisis can’t be blamed on Labour.
On an annual basis, Labour’s tenure resulted in gains of 11.5 per cent a year and National 14.2 per cent. Both healthy, but we all know the power of compound returns in investment portfolios. The annual growth under National was almost a quarter larger (23.5 per cent uplift).
It’s not just big corporates gaining value. Both mid-caps and small-caps that employ Kiwis and make up the economic fabric out-performed impressively under National.
Nearly every New Zealander has a KiwiSaver account and is saving for retirement. The returns produced by Large, Mid and Small Cap Limited are in their portfolios and have a direct impact on retirement wealth.
Superannuitants are at your core and the best way to help the next generation of them is to align with the political party most likely to deliver the right economic climate.
A few percentage points each year may not sound like a lot, but it will make a material difference. It by far outweighs the policy issue of moving the retirement age to 67.
Two years’ superannuation is worth about $30,000 to each of us. The wrong government could cost us almost $100,000 if we’re middle-aged, or over $200,000 if we’ve got 45 years saving ahead of us.
Where do those numbers come from? A quick spreadsheet adding up the portfolio value for a 42-year-old, earning $70,000 with annual pay rises of 3.5 per cent, KiwiSaver contributions of 4 per cent plus 3 per cent from their employer, the tax credit and a current fund value of $50,000. Investment returns of 5 percent were compared to 6.175 per cent (a political uplift of 23.5 per cent).
The result? National out-performs by $94,000.
For a 20-year-old starting fresh and saving for 45 years, with a starting salary of $25,000, there is $215,000 more in their back pocket.
Of course it’s too black and white to claim investment differentials over different time periods are entirely the result of politics. They’re not and we all know that. But governments do play a big hand in creating the right climate for growth.
We’ll all be fine under Labour if that’s what you choose, but I for one, will always wonder how much greater every KiwiSaver fund could have been.