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KiwiSaver popularity brings attention to 'second-order' problems

Former deputy prime minister and finance minister Sir Michael Cullen says the need for an annuity provider to help KiwiSaver members manage their lump sums on retirement is another sign of the scheme’s success.

Tuesday, February 21st 2017, 5:59AM

by Susan Edmunds

He recently joined the board of the Retirement Income Group (RIG).

RIG manages New Zealand’s only variable annuity, Lifetime Retirement Income.

Sir Michael said annuity providers had not made much cut-through in New Zealand and the products that had been available to New Zealanders were not seen as attractive.

But he said as the KiwiSaver balances built up it raised issues about what options would be available to members at retirement. “Being capital rich in retirement is not much use if you are not able to live off it,” he said.

He said Lifetime seemed to offer a viable option for the long-term.

Sir Michael said, when KiwiSaver was first developed, it had not been predicted that such large numbers of New Zealanders would join.

“The success of KiwiSaver has made these second or third-order issues more important. [Another is] are we bringing fees down quickly enough.”

New Zealand was well positioned for an income product, he said.

He said Australia was pondering the problem of a retirement benefit that was heavily income and asset-tested and a compulsory savings scheme had was lump sum orientated, which gave people the incentive to blow their lump sums so they could qualify for the pension.

“New Zealand Super is not asset tested so we don’t face that incentive for misaligned behaviour,” he said.

KiwiSaver was not the only scheme that was likely to deliver lump sums that would need to be manged, he said.

People who had joined the Government Superannuation Fund in the 1980s would start to retire over the next decades and could need help managing that money, he said.

Sir Michael said Lifetime was a good option because people who withdrew their money early could still access any remaining capital without penalty, and a guarantee would cover longevity risk.

Tags: Retirement Income Group

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Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.79 4.99 5.35 5.59
ANZ Special - 4.49 4.85 -
ASB Bank 5.80 4.85 5.14 5.49
ASB Bank Special - 4.45 4.74 5.09
BankDirect 5.80 4.85 5.14 5.49
BankDirect Special - 4.45 4.74 5.09
BNZ - Mortgage One 6.50 - - -
BNZ - Rapid Repay 5.95 - - -
BNZ - Special - 4.59 4.74 5.09
BNZ - Std, FlyBuys 5.90 4.99 5.29 5.59
BNZ - TotalMoney 5.90 - - -
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 6.70 - - -
Credit Union Baywide 5.95 5.45 5.50 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 5.00 5.20 -
Housing NZ Corp 5.79 4.85 5.14 5.49
HSBC Premier 5.79 4.09 4.29 4.89
Lender Flt 1yr 2yr 3yr
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 5.70 4.59 4.69 5.09
Kiwibank 5.70 5.09 5.19 5.65
Kiwibank - Capped - - - -
Kiwibank - Offset 5.70 - - -
Kiwibank Special - 4.69 4.79 5.25
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 6.10 5.10 5.45 -
Resimac 5.00 4.86 4.75 5.30
Lender Flt 1yr 2yr 3yr
SBS Bank 5.79 4.99 5.29 5.59
SBS Bank Special - 4.59 4.85 5.25
Sovereign 5.90 4.85 5.14 5.49
Sovereign Special - 4.45 4.74 5.09
The Co-operative Bank - Owner Occ 5.75 4.59 4.85 5.25
The Co-operative Bank - Standard 5.75 5.09 5.35 5.75
TSB Bank 5.80 4.80 5.15 5.45
TSB Special - 4.55 ▼4.49 5.15
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.95 4.99 5.29 5.59
Westpac - Capped rates - 5.26 5.36 -
Lender Flt 1yr 2yr 3yr
Westpac - Offset 5.95 - - -
Westpac Special - 4.59 4.85 5.09
Median 5.80 4.85 5.14 5.38

Last updated: 19 June 2017 9:16am

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