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Plan for the worst

Advisers may need to give their clients a reality check about the likelihood of NZ Super being available for them at 65, one commentator says.

Thursday, September 15th 2016, 6:00AM 7 Comments

by Susan Edmunds

A study by the Westpac Massey Fin-Ed Centre has shown that most young people expect there to be big changes to super by the time they retire.

Almost 85% said they expected the age of eligibility to be higher by the time they hit 65. Sixty-three per cent of respondents also believe the benefit will eventually be means tested.

“The truth is it’s not sustainable for NZ Super to be available at 65. The government needs to move sooner, rather than later because the longer they leave it, the harder it is going to be. With enough time, the age of eligibility can be raised gradually, which lessens the impact on everyone,” report co-author Claire Matthews said.

The survey also found that over 43% of respondents were dissatisfied with their current financial status, which had increased from 40% in 2014 and 30% in 2012.

Matthews said advisers should talk to their clients about the possibility for changes to superannuation over coming years.

“How changes will impact on a particular client depends on their age.  There are different approaches to dealing with it.  An adviser may simply choose to go with a client’s expectations in developing their financial plan, although I would expect the adviser to provide advice in relation to the reasonableness of those expectations.”

She said financial plans could be developed for worst-case scenarios. “If the reality is better, then the client will be better off. These approaches all have pros and cons, but the key is that advisers must be having the conversations with their clients, so their clients are making informed decisions – and I’m sure that is happening.”

Tags: retirement

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Comments from our readers

On 15 September 2016 at 8:26 am Brent Sheather said:
Westpac Massey? WTF? Credibility…gone. I have often wondered why our universities rarely come up with any original, useful research on personal finance matters unlike for example the London Business School, Princeton and University of Chicago to name a few. Now we know. This might also explain why their financial planning courses leave something to be desired as well. In fact some of the responsibility for poor financial advice rests with these mercenary academics for hire. Of course the same can be said for the Commission For Financial Capability.

What’s next? Westpac FMA, Westpac MBIE?

Westpac Brent
On 15 September 2016 at 10:42 am w k said:
brent, have you been to any of their seminars, conferences & workshops? i have - quite a number. and you are right, virtually every one of those i've attended i hear the same tune. sometimes you get a different trumpet .... but pretty much the same tune.

the overall feeling/impression i get from it all - funding was the agenda - that is, to keep their job.
On 15 September 2016 at 11:03 am said:
Over 43% of respondents were dissatisfied with their current financial status. I would have thought the figure should have been closer to 80%. With only 5% of employed earning over $100k the figure could arguably be 95%.
It beggars belief these academics, with Masters or Doctoral degrees, lavish Bank sponsorship and the backing of the Commission for Financial Capability, can’t seem to understand why people earning the medium income of $28,500 per annum or less, can’t afford to contribute $1,042 to their KiwiSaver to receive the $512 tax handout nor have any capacity to save surpluses into retirement accounts.
Very few of 30 year olds in the current workforce will be able to retire without the needing the safety net of a universal superannuation scheme.
I have not seen any ideas or suggestions from the bank sponsored academics or the Commission for Financial Capability to formulate a plan to get at least 25% of current 30 year olds in the workforce over the retirement line without needing state support.
On 15 September 2016 at 2:52 pm R1 said:
Hi Mike, I suspect the sponsored academics and Govt. still believe (or perhaps better worded - will continue to run with the mantra) that with a relatively strong economy the 'trickle-down' effect will take care of the masses. What we need is more tax cuts for corporates and high income earners so they really prosper and will kindly employ more people and hand out pay rises. If only we still lived in Jurassic Park this might be true. Unfortunately it is every person for themselves and we know who has their "hands on the tiller" when it comes to policies, regulations and laws that could be used to ensure wealth is shared so we don't have a rising underclass of dependents (dodgy research = dodgy policies + . . . ). When will we be required to start working for the pension I wonder.
On 16 September 2016 at 11:59 am Kimble said:
So funny. Just what do you guys imagine that sponsorship entails?

"Oh thank you Westpac! You bought us a toner cartridge for the printer! Of course we will just write whatever you tell us to write! Of course you can use our academy to give your propaganda some extra credibility! And of course you can then stupidly reveal your nefarious activity and our jubilant corruption by BRANDING YOUR NAME TO THE SIDE OF THE CENTRE!"


Look, there IS a group of people in NZ that the public considers beholden to the interests of the big banks and themselves, to the detriment of the people they should be serving. And it isn't Massey University.
On 18 September 2016 at 2:40 pm blogger billy said:
Recent stats revealed 43% of households in NZ only own 3% of the assets and 42% of households receive more in benefits and tax credits than they pay in income tax.

Circa 2011 Sean Hughes more or less called us all cowboys and was unrepentant when challenged

Circa 2012 if he had asked us cowboys where the risks lay (start with those who handle clients money directly), he may well have avoided the David Ross debacle

Circa 2012 to today the FMA buried all FA’s in compliance

Circa 2012 to 2016 Murray Weatherston asked the FMA again and again “what is the problem they are trying to solve?” No answer (justifying their big salaries ?)

Circa 2013 to 2016 FSCL report virtually no complaints about FA’s and investments

Now in 2016 the FMA and CFFC seem to be making noises on how FA’s “should” help them educate NZ households

Another “should” on the overloaded FA’s

Perhaps we FA’s might reply “Sorry chaps, can’t help. Ain’t nobody here but us cowboys”.
On 19 September 2016 at 4:22 pm Murray Weatherston said:
More alarmism by the scaremongers.
While the age probably will be raised for NZ Super, my guess is the smart money is still on raising the age of eligibility by 1 month every 6 months from 2020, so that by 2032 the starting age has reached 67.
The Cullen Fund (NZ Super Fund) is designed to knock the peak off the future funding cost from say 2030 to 2050.
Neither major political party has any desire to reintroduce means testing - the scars of the surcharge still hurt for both of them.
Many home owning Kiwis do not need much savings for them to maintain their lifetime consumption at its current level. With the mortgage paid off and kids off their hands, a married couples pension will fund a lot - sure it won't fund 3 months overseas a year, but then during their working lifetime, most NZers didn't afford that either.
Commentators spouting the mantra "you must save more" ignore the embedded value of NZ Super.

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