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Turn the lights on and make sure the drivers are licensed

The history of superannuation over the past 25 years was recently described as being like driving down a country road at night in a car with no suspension and the headlights turned off.

Wednesday, June 20th 2001, 5:34PM

The history of superannuation over the past 25 years was recently described as being like driving down a country road at night in a car with no suspension and the headlights turned off.

That's a pretty apt analogy for what has gone on over the years thanks to the behaviour of our elected politicians.

It seems though, we are now at a point where we, as New Zealanders, need to look at upgrading our car.

When we consider what sort of car we can afford the answer is that it ain't going to be a Rolls Royce or even an BMW.

In all likelihood we can afford a decent second hand family saloon that isn't a Japanese import with the clock wound back.

The car will make the ride more comfortable, but it certainly won't be luxurious.

Perhaps the Government's idea of partially pre-funding the state pension is within our price range.

It smoothes out some of the bumps for the first part of the superannuation model and it's probably affordable, as long as it's not bought on hire purchase, ie: don't borrow to invest in a fund.

Before we put the car on the road though we need to make sure all the people expecting to drive it have valid licences.

Some of the politicians are young bucks for whom speed and popularity are the prime motivations.

What's scary is the lack of skills displayed by these people, all of whom should know better.

A quick scan through recent reports on the superannuation debate shows many politicians clearly either have no understanding of basic investment principles, or they choose not to let the facts get in the way of a good story.

For example, investing offshore has been described by one politician as taking out a loan and giving the money to your accountant to gamble on the international sharemarkets.

Such comments show little understanding of investing or what professional funds management is all about.

Next we have the comments about exporting capital offshore - which is really saying New Zealanders shouldn't invest in offshore assets.

This comment goes totally against what has been proven to be a sensible and prudent investment strategy, and what successful investors and money managers currently do.

What's more if people were given tax cuts and told to invest the money they would, judging from current trends, invest something like 40% to 50% offshore.

Here's another pearler: "Figures released yesterday show the returns of managed funds means if the Government had put $600 million into managed funds last year, it would probably only be worth $570 million this year. That is not a smart investment."

Think about it this way. If the money was invested offshore three or even two years ago, it would now be sitting on top of a substantial profit. Also, this isn't a one year investment, it is a long-term one.

Clearly some of our politicians should not be allowed out of the paddock in the new car.

If we get the new car on the road, turn on the headlights and have competent drivers it's possible to see a bit further ahead than before.

To make the journey safer and more comfortable future road works have to be planned years ahead that way some of the concerns raised about pre-funding can be dealt with.

For instance, one of the biggest issues is that at its peak the fund is only likely to contribute 14% of the cost of future pensions.

Politicians should work towards changing the design of NZ Super and develop ways and means of reducing the cost of the pension.

This leads to another criticism that the fund will over decades be wound down to zero. By changing the shape of super benefits maybe the investment strategy can be changed so instead of using capital to pay for pensions, they can be funded out of the fund's income, thus giving the fund greater longevity.

We are approaching a major intersection with super, partly because the current Government wants to do something about it. Politicians have to look ahead and think about the design of NZ Super.

We have to make sure our drivers know which turn to take because the intersection looming is a roundabout which some drivers prefer to stay on indefinitely rather than risk navigating along an untried road.

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AMP Home Loans $200k+ 6.39 5.59 5.99 6.30
AMP Home Loans LVR <80% - - 5.99 -
ANZ 5.99 5.85 6.49 6.85
ANZ LVR > 80 5.99 6.35 6.99 7.35
ANZ Special - - 5.95 -
ASB Bank 6.00 5.85 6.49 6.85
ASB Bank Special - - - -
BankDirect 6.00 5.85 6.49 6.85
BankDirect Special - - - -
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BNZ - GlobalPlus 6.19 5.85 6.29 6.29
BNZ - Mortgage One 6.60 - - -
BNZ - Rapid Repay 6.19 - - -
BNZ - Std, FlyBuys 6.19 5.85 6.29 6.29
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Credit Union Auckland 6.20 - - -
Credit Union Baywide 5.85 5.90 6.50 -
Credit Union North 6.45 - - -
Credit Union South 5.75 - - -
eMortgage 6.04 6.15 6.69 7.19
Fidelity Life 5.70 5.40 6.00 -
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Finance Direct 6.10 6.45 6.69 7.10
First Credit Union 6.45 - - -
General Finance 5.95 6.25 6.50 7.10
HBS Bank 5.90 ▲5.60 ▲5.99 ▲6.35
HBS LVR > 80% - - - -
Heartland 5.95 6.25 6.50 7.10
Heretaunga Building Society 5.75 5.50 6.30 -
Housing NZ Corp 5.75 5.50 6.30 6.40
HSBC Premier 6.24 5.59 6.29 6.55
HSBC Premier LVR > 80% - - - -
HSBC Special - - 5.79 -
Lender Flt 1yr 2yr 3yr
Kiwibank 5.90 5.69 5.99 6.40
Kiwibank - Capped 5.65 6.50 - -
Kiwibank - Offset 5.60 - - -
Kiwibank LVR > 80% - - 6.29 6.40
Liberty 5.64 - - -
Napier Building Society 5.80 6.00 6.70 -
Nelson Building Society 6.45 5.95 6.60 -
NZ Home Loans 6.10 5.69 6.29 6.60
Perpetual Trust 7.70 - - -
RESIMAC - lo doc 7.34 7.14 7.49 8.05
RESIMAC LVR < 80% 5.84 5.64 5.99 6.55
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RESIMAC LVR < 85% 6.84 6.64 6.99 7.55
RESIMAC LVR < 90% 7.84 7.64 7.99 8.55
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SBS LVR < 80% - - - -
Silver Fern 5.95 6.10 6.55 7.05
Southern Cross 5.95 6.25 6.50 7.10
Sovereign 6.10 5.85 6.49 6.85
Sovereign Special - - - -
The Co-operative Bank 5.95 5.65 5.99 6.35
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Westpac 5.74 5.85 5.95 6.85
Westpac - Capped rates - 6.19 6.69 -
Westpac - Offset 5.74 - - -
Median 6.00 5.85 6.29 6.85

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