By Andrew Coleman*
Economic policy sometimes fails to predict how people actually behave. In 1975, New Zealand scrapped its new compulsory saving scheme and replaced it with National Superannuation, a scheme that provided everyone over 60 with the same government pension regardless of the income they earned or the taxes they had paid. It was expected that people who wanted a higher retirement income would save the difference themselves. Policy makers assumed most people would find this straightforward.
Just as this was happening Daniel Kahneman and Amos Tversky, two Israeli psychologists, were pioneering a revolution in economic theory. They researched how people actually made choices, particularly choices that had uncertain outcomes such as savings and investment. Their results caused a shock wave in the economics profession.
Previously, most economists assumed that most people sought out the best information and clear-headedly chose the options that had the best prospects. But this was not the case. Humans, it appeared, often made lousy choices. Our brains are not naturally good at understanding probability. We let irrelevant information bias our judgements. Our choices depend on the ways issues are framed, including whether identical outcomes are framed as wins or losses. People are much more likely to favour a medical intervention which has a 90% success rate than one which has a 10% failure rate, for example.
Together, Kahneman and Tversky kick-started the field of behavioural economics. Kahneman, who died earlier this year, received the 2002 Nobel Economics prize for this work – although this came too late for Tversky, who died in 1996.
Behavioural economics rapidly expanded and explored other issues. One set of issues concerns the difficulties that many people have with short-term self control when trying to achieve long-term goals.
Another set of issues concerns the way people select information sources that confirm their existing views, and ignore information that challenges them. A third set of issues concerns was the way people delay dealing with bad news, because it makes them so uncomfortable, allowing problems to get worse.
We all recognize the times in our lives when we do these things. What we don’t necessarily recognize, however, is how difficult this can make it to adequately save and invest for retirement.
Over the last 40 years, a large number of economic studies have shown that saving and investment is difficult for many people. It is difficult to work out how much we should save; and it is difficult to work out how to invest well. It seems our brains are not wired to calculate investment probabilities, and we often are swayed by recent trends.
Fortunately, many companies offer products that are designed to make saving and investment easier. But not everyone uses these companies, and those that don’t often make saving and investment decisions that are pretty bad. The evidence is too large to summarise in a line, paragraph or even an article, but a particularly readable introduction to behavioural finance is here.
While some economists were surprised to discover that many people find saving and investment difficult, most people were not. Indeed, almost all countries have adopted contributory saving schemes because most people believe they could use some help saving for retirement. They also believe they need help managing their money when they retire. Contributory schemes are designed to help people save and invest while they are working, and to retire worry free when they are older.
This is why in most countries people who pay more in taxes get higher pensions – the pension scheme is seen as a way of helping people save. These schemes are somewhat complicated to operate, as the amount of taxes people pay are monitored and everyone gets a different pension when they retire. But they are consistent with the adage of Richard Thaler, winner of the 2017 Nobel Economics prize: “The lesson of behavioural economics is that people only save if it’s automatic.”
New Zealand Superannuation is much simpler to run as everyone gets the same government pension which is unrelated to the taxes they have paid during their lives. Nonetheless, the simplicity of New Zealand Superannuation is misleading. Since everyone receives the same pension, middle and higher income New Zealanders who want to maintain their living standards in retirement need more private savings than people with similar incomes who live in other countries.
Most middle and higher income people do save privately for their retirement. But this is where New Zealand’s system makes life not so simple. People who want more than a basic pension have to do a lot of financial management themselves to provide additional amounts. This not only exposes them to investment risks – including the risk of fraud – but it assumes people have a level of interest in and competence at money management that many do not have.
Most OECD governments have much less confidence than the New Zealand government that people will be able to save and invest the correct amounts to ensure they have enough money when they retire. The contributory systems or compulsory savings schemes these countries use are designed to make it much simpler to manage saving and investment decisions. As a result, people in most OECD countries have to do far less of their own private financial planning and management to obtain a comfortable living standard in retirement than people in New Zealand.
Middle and higher income New Zealanders have much more need to manage their money and save and invest to ensure they have a comfortable retirement.
KiwSaver is designed to help people save for retirement if they want more than the government pension, but it only helps before age 65. Once you are over 65, all the management responsibility is your own.
In this respect, New Zealand’s government retirement system is quite extreme. It assumes that all people are competent to make their own savings and investment decisions before they retire, with little government help. It also assumes that older New Zealanders can adequately manage their savings after they retire, even though this is quite a difficult problem given the vagaries of how long people live, and whether they get sick or even have dementia.
Managing your investments before and after you retire might be fine if you are an investment banker, a tax accountant or just super rich, but vast amounts of international experience suggests that many people will not find it easy.
Nonetheless, despite this evidence, successive New Zealand governments have adopted the attitude that you’re on your own if you want more than the basic pension. Whether you are 19 or 90, it is considered your responsibility to manage your savings, manage your investments, and manage how much tax you pay. This is a very different approach to countries that have contributory pensions or compulsory saving schemes.
Of course, KiwiSaver does help. Yet it is only a partial solution. First, it is voluntary, so not everyone joins. Secondly, the contribution rates tend to be small, much smaller than the amount of savings done in contributory schemes in similar countries. Thirdly, it does not provide people with options to manage their money when they are old, a major oversight.
Even though some of the insights from behavioural economics have been used to encourage people to use KiwiSaver while they are working, these insights were completely ignored when it comes to spending KiwiSaver balances in retirement.
Given the government requires middle income New Zealanders to rely more on their own savings for additional retirement income than middle income people in other countries, you would think that the government would have made it as simple as possible to save privately for retirement.
Unfortunately, this is not the case. For decades governments have made the simplest saving and investment products – bank deposits or investments in government bonds – the most heavily taxed investments in the country. Bank deposits in New Zealand are so heavily taxed because interest income is not adjusted for inflation before it is taxed. This raises the effective tax on inflation-adjusted interest earnings, causing them to be significantly over taxed. Economists have decried such taxes for more than a century, starting with a 1923 paper by Jacob Viner, and while many countries have adjusted the way they tax retirement savings to minimise this effect, New Zealand has not.
The problems don’t just concern bank deposits. New Zealand taxes income from other classes of investments at some of the highest rates in the OECD – unless, of course, the investment income is in the form of capital gains, which have been mysteriously exempt from tax. Part of the reason why taxes on investment income are so high is because New Zealand does not use social security taxes or compulsory saving contributions to fund the pension.
Moreover, rather than use the standard OECD method of taxing dedicated retirement saving funds such as KiwiSaver accounts, in 1989 the government adopted a particularly distortionary tax regime for retirement savings. This topic is sufficiently complicated that it will be addressed in its own article in a couple of weeks. Suffice to say for now, New Zealand replaced ‘simple’ with something that needs an army of tax accountants and advisors to understand.
It is hardly surprising that New Zealand’s tax system, combined with relatively low pensions for middle-income people, have made rental housing one of the favourite investment choices for people who are saving for retirement. This combination has placed upward pressure on housing markets, raising the housing wealth of baby-boomers – but at the expense of younger generations. Artificially high house prices make life harder for the next generations who want to start families -and this is not just unfair, but unnecessary. New Zealand Superannuation may have reduced income inequality amongst older people, but it has also shifted it elsewhere.
Kahneman and Tversky showed the way people make decisions frequently leads to less than desirable outcomes. They also showed that outcomes can be improved if people recognize and counteract these tendencies. Governments can also make less than desirable decisions. Since the 1970s successive New Zealand governments have chosen taxes that are very different from the taxes adopted in richer, more productive, and more equitable countries elsewhere in the world, and the taxes we have chosen may be at the heart of our seemingly intractable productivity and inequality problems.
The evidence from these countries suggests there may be better types of taxes to fund our government pensions, and less distortionary ways to tax personal retirement income accounts. They are big topics, and the subject of the next few articles.
*This series and an accompanying paper are based on work I started in 2020 with Jeanne-Marie Bonnet while we were both at the University of Otago. I am very grateful for her assistance and insights. All errors remain my own.
(This article is part 7 in the series. Part 1 is here, part 2 is here, part 3 is here, part 4 is here, part 5 is here, and part 6 is here).
**Andrew Coleman is a visiting professor at the Asia School of Business. This article is his personal view of retirement policy in New Zealand, based on academic study.
Coleman is on extended leave from the Reserve Bank of New Zealand, while working overseas. The views expressed in this article do not represent the RBNZ and are unrelated to work conducted at the Bank, which has no responsibility for retirement policy in New Zealand.
45 Comments
"the taxes we have chosen may be at the heart of our seemingly intractable productivity and inequality problems."
Spot on. And it's the absence of taxes in what is now the only driver of our economy; Debt backed Property Speculation, that sees us where we are today.
Taxing savings without allowing for inflation has always struck me as unfair; just as unfair as not automatically adjusting tax brackets annually. Both would be easily corrected if a government had the will to do so.
Changing the tax-tax-notax regime introduced in 1989 would be harder, I think. It would have worked fine if the government of the day had simultaneously introduced capital gains tax. It didn't, and subsequent governments refuse to do so too, perhaps because so many of our MPs invest in numerous houses (not mentioning names, of course). Capital gains tax is still the answer.
It might be possible to introduce a new form of KiwiSaver that did not tax internally and instead taxed on payout in retirement. But could any government be trusted not to tamper? Look at KiwiSaver now: notionally for retirement, but people can withdraw their savings PLUS the state subsidy to buy a first home and further inflate the housing market. So not for retirement at all.
Excellent article. The NZ Green Party has a simple solution to all this, a wealth tax with a threshold of $2 million in savings or the yearly value of businesses, including the family home. The proceeds would go to those who do not have any savings.
In fact, NZ already has some wealth taxes which are extreme by the standards of other OECD countries, since they tax unrealised gains. These are taxes such as the Financial Arrangements regime, and the Foreign Investment Fund tax. It is because of taxes like this that many overseas investors have decided not to start businesses in NZ that would have created jobs.
Rest assured, if the Greens get their way next time the Left is in power, many small and medium sized businesses will flee to Australia. Professional people such as many doctors and dentists will also leave.
Greens are idiots and have no clue, which is clear from their performance all of this year. They are falling apart and are actually a disgrace. Their policies will never likely see the light of day, and if they do, then people that want to stay in NZ, will just shift money off shore and will not pay the Greens wealth taxes. Many probably have arrangements such as this in place right now.
Yes, you are correct. I know people who have put most of their assets overseas in case the Greens ever get their way. And I know people who had intended to invest a great deal of money in NZ, but when they heard about the wealth tax proposed at the last election, they changed their minds.
Then what you do is just rent, using the dividends or tax free returns from your overseas investments....or you float around in a large boat, registered off shore. What their silly policy actually does is lose ALL tax revenue from wealthy people that shift investments and assets away. So, instead of gaining a little bit more, they lose the lot. That's what happens in other countries and the same will happen here, and is why wealth tax fails. and why failures like the Greens support such ideas.
So your solution to large scale reform to fund the pension is for you yourself, to avoid any possible increase in taxes or contributions as an individual instead of contributing towards your own pension? I suppose you would invest overseas to profit then come back to claim said pension later and complain that the lazy youth aren't working hard enough. Your mentality is the source of the problem here.
What I am telling you is that the Greens happily telling people that they will tax the rich by taking their assets via a wealth tax is a complete farce. Their supporters are so gullible that they think it will actually happen. In practice people will shift assets and avoid it, just like they do everywhere else this has been attempted. In short. they are promoting something that will fail, and make things worse, which is pretty much par for the course with them.
Averagejoe: 'Then what you do is just rent, using the dividends or tax free returns from your overseas investments....or you float around in a large boat, registered off shore.'
Somebody will own the land, pay the taxes, and pass the cost on to the renter. That's the fun thing about land (and fixed property) taxes; inescapable.
Anyone who hates the wealth tax this much needs to start arguing for more economically efficient alternatives, such as a land tax. Our current combination of low growth and rising inequality is a road to societal collapse - and voters correctly intuit that the easier fix is to reduce inequality. If the centre and right keep up their ridiculous extend and pretend approach, people will eventually vote for the green's wealth tax, however stupidly designed it is.
An article of contradictions and incorrect premises....
"Fortunately, many companies offer products that are designed to make saving and investment easier."
yet
"Most middle and higher income people do save privately for their retirement. But this is where New Zealand’s system makes life not so simple. People who want more than a basic pension have to do a lot of financial management themselves to provide additional amounts. This not only exposes them to investment risks – including the risk of fraud – but it assumes people have a level of interest in and competence at money management that many do not have."
"Of course, KiwiSaver does help. Yet it is only a partial solution. First, it is voluntary, so not everyone joins. Secondly, the contribution rates tend to be small, much smaller than the amount of savings done in contributory schemes in similar countries. Thirdly, it does not provide people with options to manage their money when they are old, a major oversight."
https://fisherfunds.co.nz/kiwisaver/kiwisaver-retirement
And attributing an RE bubble to this?....really?
Hello "Let me be frank"
I am not sure where you see contradictions, but am happy If you can explain these to me so I can correct them.
The article essentially makes four points.
(a) Many people are not very good and making very good saving and investment decisions.
(b) Most countries except New Zealand have used government contributary savings schemes (or compulsory saving schemes) to help people save and invest.
(c) New Zealand has adopted a different approach, providing people with a basic welfare pension and letting people solve any residual saving and investment problem on their own, or with the help of private sector entities.
(d) Rather than make private saving as easy as possible, the government has chosen particularly distortionary tax options which make the problem of saving and investment more difficult, and which has biased people towards low taxed real estate investments.
Collectively, these choices do not seem very sensible to me, especially point 4. For some reason, successive New Zealand governments seem to have a preference for more distortionary taxes, particularly towards capital incomes rather than less distortionary taxes.
If the private sector provided people with a full set of saving and investment options, the third point could be a reasonable response to the saving and investment problem. In fact they don't. There are almost no private providers of annuity-based retirement incomes in New Zealand, for example, and the government does not sell or otherwise provide annuity income in amounts beyond the level of NZ Superannuation. This is a major difference between NZ and other countries, which means New Zealanders do not have the option of variable-level annuities that are available to people in most OECD countries. A person simply cannot give a private entity in NZ $100,000 in exchange for an additional $8000 per year for as long as they live (or whatever an appropriate annuity price could be); and nor can they do this with the Government. (In contrast, people could do this in 18th century Britain, with either a private company or the government as a counterparty.) In the absence of such markets, older New Zealanders do have fewer options than most older people living overseas.
As it turns out, while there are a lot of firms who provide some reasonably sophisticated savings and investment options for people over 65, and your link is to one of them, many people do not use them. Perhaps it is the role of government to help people solve these problems, perhaps it is not. At some point this is an issue or preferences, not logical consistency. I have tried to keep my own preferences to myself, except for a strong preference that people under 45 should be given an option to design the retirement and tax system they want for themselves, rather than have to rely on the system they are inheriting from previous generations. But one should be wary of designing public policy systems which a minority of people find easy to use, but which are not so easy for others, no matter how appealing liberalism may be to many people (and JS Mills "On Liberty" is one of my favourite books). Medical systems that rely on patients being fully informed are not very good medical systems, and medical systems that rely on the widespread use of private intermediaries such as insurance companies don't in practice work as well as medical systems with hefty government involvement. The Canadian philosopher Joseph Heath has written about the problems of policies designed by and for what he calls the "self-control aristocracy" - people have much better self-control than average , such as Olympic quality athletes, because in practice they do not lead to good outcomes for large numbers of people. The question is whether NZ's retirement income policies are as good as possible or whether they can be improved. I don't see good reasons to believe our systems are as good as possible, and find it very difficult to believe that a system relying on private provision of retirement income for levels above New Zealand superannuation could not be improved by having better designed tax policies.
AC
The poor and investment challenged are better served by a state that ensures the real resources that their future selves will require are available in sufficient quantity/quality rather than compelling them to buy chips for any future bidding war....and all without a premium.
There is no shortage of opportunity nor 'salespeople' for this who wish to participate in 'investment' should they so desire despite your protestations, as evidenced by the growth of financial services these past decades.
New Zealand already provides an annuity for everyone at 65: NZ Superannuation. Its failing is that it is not enough for those without other incomes, who really need it, and they are the poorest in society, the ones whom the Government must take care of. Middle-income and upper-income people tend to look after themselves, so why should the state interfere with them.
NZ Superannuation needs to be increased to provide a reasonable living for those who need it. And that increase needs to be balanced by introducing a surtax on other incomes of those for whom NZ Super is merely a nice-to-have.
What we need is a pension scheme based on what you put in is what you get out
NZ Superannuation has been turned into a benefit
This was not how it was initially sold
It would not matter what system was invented the Politicians will not leave it to do its job. That is a sum of money for people to live on in retirement
I am of a mind to save and invest. Which has been my focus all my life. Some others not so.
I advocate a compulsory large contribution Kiwisaver to replace National Super. Including for me who probably would have done what I could without compulsion. Because it also protects me from people who can't/don't save. And then I get taxed for them as well.
Except most people without any contributions to kiwisaver also have no income able to support their cost of living. This article is complete tripe. It started by punching down saying poor people must not be competent enough to save and that those without a retirement nest egg must be failures in investing. Neglecting the fact SHIT HAPPENS. You get cancer, nest egg gone. You have a disabled child you could not predict, gone. You have a bad divorce, gone. You are exposed to a 1/1000 natural accidental event, gone. You are made redundant early and cannot find new work, gone. You get a degenerative disease that hits early like MS that impairs your ability to work, gone.
It is not competence the author has. It is dumb luck. The more they fail to realize their own survivorship bias, the more foolish and irrelevant their opinions are in the real world where real shit happens to people all the time. Hence poverty. Not everyone has a spare couple hundred thousand in the bank for medical treatment either and NZs insurance industry does discriminate so lets stop insulating these "competence" based investors from their own ignorance in the basic facts of life and simple maths.
Kiwisaver is just more of the same; a cushion that serves those who do not need support with government lolly scrambles and the operators of such investment schemes with dedicated bonuses. It is a circle jerk made up of circle jerks that will not serve most the populace for the intents it was set up because it covers literally none of those who actually need a pension benefit. Just those with their snouts in the trough.
Lets be really honest and take a look at why the author had to punch down and suggest it was competence holding people back. It is really clear there is a lot of key competencies missing even in their understanding of basic medical & mathematics facts.
This is why economists are not even worth the time of day, or the paycheck. Their ignorance knows no bounds.
That is why the US Social Security System for retirement is an "untouchable". It's annual retirement income for a Husband & Wife can range up to f NZ$100,000, and has the benefit of the lesser earning spouse (stay of home mother's for example) being able to elect to receive 50% of the higher earning spouses Social Security Benefit, since as a low wage earner who contributed little during their lifetime would end up with less in retirement than a person with a NZ Super. So for the American worker 7.65% comes out of their paycheck--before any income tax is deducted.
Mandatory Savings begins with your first paycheck--mine at age 14, and is calculated as follows:
Social Security: The Trust Funds Congressional Research Service 2 (including FICA and federal personal income tax withholding). The FICA tax rate of 7.65% each for employers and employees has two components: 6.2% for Social Security and 1.45% for Medicare Hospital Insurance. The SECA tax rate is 15.3% for self-employed individuals, with 12.4% for Social Security and 2.9% for Medicare Hospital Insurance. The respective Social Security contribution rates are levied on covered wages and net self-employment income up to $168,600 in 2024. 5 Self-employed individuals may deduct one-half of the SECA taxes for federal income tax purposes. In 2023, Social Security payroll taxes totaled $1,233.1 billion and accounted for 91.3% of the program’s total income. The current Trust Balance is $2,788 billion.
Social Security is financed by payroll taxes paid by covered workers and their employers, federal income taxes paid by some beneficiaries on a portion of their benefits, and interest income from the Social Security trust fund investments. Social Security tax revenues are invested in U.S. government securities (special issues) held by the trust funds, and these securities earn interest. The tax revenues exchanged for the U.S. government securities are deposited into the General Fund of the Treasury and are indistinguishable from revenues in the General Fund that come from other sources. Because the assets held by the trust funds are U.S. government securities, the trust fund balance represents the amount of money owed to the Social Security trust funds by the General Fund of the Treasury. Funds needed to pay Social Security benefits and administrative expenses come from the redemption or sale of U.S. government securities held by the trust funds
Highly subject to the fund type and the provider of course.
There is even worse results once you realize that the growth in many account statements also is considering your contributions continuing into the pool. In which case not only would that 1.9% difference be losing more value compared to most conservative managed funds & cash investments it is also losing much of the capital you put in. If you had it in a term deposit instead it would not be better then inflation but it would be better then the fund you report.
No matter the fund or provider you would still be losing money as inflation in most living costs exceed most returns for many Kiwisaver managed funds. In fact sadly since the reporting requirements and standards are lower for Kiwisaver compared to many other investments it is actually far more hazardous this 'set and forget' branding marketing we have around Kiwisaver. People need to take more notice and move more often to better diversify their investment and retirement planning. Sticking with Kiwisaver alone is not an answer and for many it is merely a block to life saving treatment or life saving needs. It is a managed fund with none of the major legal requirements or customer services, none of the major competition, and all of the bad returns piled up.
If people truly wanted no responsibility in their investments they would manage a key government department or infrastructure company, set up a property scam, run multiple rentals that have zero property maintenance funded out of their pockets, or become politicians.
You can argue for more taxes, but it won't make things cheaper, it makes them go up.
Comrade Ardern found this out shafting landlords.
You can hand your hard-earned savings over to superannuation and investment companies, but by the time taxes and fees are subtracted you're better off buying another property and becoming a landlord. Not ideal, but you're the boss, not someone else.
Master of your own fate.
PS. I do have a stock market investment fund, I've just received a letter from the company involved, it's 4 pages long and chokka with legal jargon. So I'm bailing out.
Newton's 3rd law..."to every action, there's an equal and opposite reaction".
You can hand your hard-earned savings over to superannuation and investment companies, but by the time taxes and fees are subtracted you're better off buying another property and becoming a landlord. Not ideal, but you're the boss, not someone else.
*Under the current settings, maybe
Quite like the idea that people who make crap decisions get propped up by not people who don’t make crap decisions. Why the hell should they have to take responsibility for themselves and decisions they make? Let’s run with the NZ Green Communist’s “simple solution”.
Of course you do. The faulty sarcastic premise insulates the ignorance of those spouting the statement in the first place. Be really honest and take a look at why the author had to punch down and suggest it was competence holding people back. It is really clear there is a lot of key competencies missing even in their understanding of basic medical & mathematics facts. Survivorship bias by arrogant rich idiots is not new. In fact it is a very well known human flaw. We have a blindspot to the reality of what causes people to start in poverty, remain in poverty or go into poverty.
I suggest you have a meeting with a MS or ALS patient forced to fund their own treatment. I would relish their reaction to your opinion they made crap decisions which is why they are poor and begging for funding. Or how about with parents of a severely autistic child. Go on tell them they should have let the kid die rather then give up their job to take on full time care. Or how about those who had their house burn down due to electrical faults that were undetected and not maintainable. After all in your eyes they chose to be poor, to lose funds and financial position, simply by their choice to maintain human life through natural life events eh.
We support the incomes and financial position of many who have blown investments through poor decisions, property investments, company failures and project mismanagement all the time. We even support those who take high risk activities for luxury entertainment and cause themselves severe injury. Just look at the C-levels of most companies & govt departments for our support of their bad choices or the makeup of ACC. Yet for those who have no choice in their position we pull back support and say it must and been choice and their responsibility even though in most cases there was literally no choice available for them to avoid the position they were in. Aside from not living of course. Try rationalizing why we support C-levels through their multi million dollar failures or drink driving accidents yet do not support those with chronic illness from birth. If you think it is aptitude sadly you are greatly mistaken.
We already rig the game by denying education & employment opportunities as well so our measure of worth or skills is merely a function of who we favored early on. Lets really take a hard look at why we are ok supporting those who need no support the most and yet withhold support and heap abuse on those who face more lack of choice & opportunity in their life. Our choice as a nation is really to create a growing and massively indebted society that cannot sustain itself simply because we waste most the funds on frivolous benefits to those above wealthy yet cut support for those who really need it (support that would prevent greater levels of community wellbeing & financial harm). No person is an island and those who suffer the most have a network of people around them who are also affected by the denial of equity. For example families who supported survivors of institutions post severe abuse found they had their life savings drained just trying to cover the medical treatment from the physical effects of the harm from such state systemic abuse. In turn, communities were poorer. It is not their choice to have those life events happen to them & family, to be abused or to have family taken from them to be abused then denied even the basic medical care & education support we provide to drunk drivers. It was entirely that NZ chose to be stupid and fund bailouts to mismanaged banks and failed investment company directors instead over the same period.
It is not competence the author has. It is dumb luck. The more they fail to realize their own survivorship bias, the more foolish and irrelevant their opinions are in the real world where real shit happens to people all the time. Hence poverty. Not everyone has a spare couple hundred thousand in the bank for medical treatment either and NZs insurance industry does discriminate so lets stop insulating these "competence" based investors from their own ignorance in the basic facts of life and simple maths.
Kiwisaver is just more of the same; a cushion that serves those who do not need support with government lolly scrambles and the operators of such investment schemes with dedicated bonuses. It is a circle jerk made up of circle jerks that will not serve most the populace for the intents it was set up because it covers literally none of those who actually need a pension benefit. Just those with their snouts in the trough.
Lets be really honest and take a look at why the author had to punch down and suggest it was competence holding people back. It is really clear there is a lot of key competencies missing even in their understanding of basic medical & mathematics facts.
This is why economists are not even worth the time of day, or the paycheck. Their ignorance knows no bounds.
Lets be honest. Let the author recognize their ignorance in basic life facts and mathematics, and their cognitive bias. Then we can be honest about why most of those who actually need a pension benefit have next to no savings to start with and close to none near retirement. Then we can actually look at the systems actually needed for retirement support for the nation. In case you did not realize it most of those picking up a pension benefit don't really need it and those who do actually need a pension benefit have no opportunity to "save" in the same way rich insulated patronizing arrogant self inflated egotistical economists do. It is sort of a luck of the draw that we continue to overvalue those who contribute spouting garbage versus those who pick up garbage or are forced to save people from the toxic effects of it.
Lets be really honest with ourselves and then we can make a significant change and improvement to our huge incoming pension benefit taxpayer bill and living cost gap with the benefit. Or we can continue our trend to a Logan's Run style discord. It already exists in our plans for hospital & retirement care management.
Protip to those planning to retire: Australia cares more about medical ethics for the elderly and has more laws to prevent severe physical abuse and neglect in retirement facilities. Get out of NZ while you still can pass the visa requirements. Either that or hope you have not burned bridges with your children yet that they are willing to give up their jobs and savings potential to take on your care & support roles. A burn the generation down for your own needs strategy but it works out ok if you constantly have more kids then the number of support staff needed required to fill the roles for your care. They in turn need to have more and more kids to support them in a ponzi scheme we already realized was broken. So broken we started importing people into care and support roles who really don't care about ethics, the people they care for, or medical standards who in turn cannot meet their cost of living due to the bottom feeder levels of pay. Good times ahead eh.
NZ's Superannuation scheme acts more like Universal Income, e.g. a flat amount given to everyone (but you need to be 65 before you become 'everyone').
Where the problem lies is that it is being paid from current taxation. Were it being paid from investment returns from a central government that had been growing and growing from day one then many of the problems, perceived or real, wouldn't exist.
The National Party has much to answer for. (More so too given they've had ample opportunity to correct their failure.)
Yes, NZ Super is like a universal basic income for the over-65s. It's not enough for those who need it (those without other income), and it's too much for those who don't. NZ needs to increase Super, but put everyone who signs up for it on a separate tax scale that will claw back much of their income from other sources.
https://cdn.auckland.ac.nz/assets/business/about/our-research/research-…
To improve the funding of NZ Super for the future, tax contributions to the NZ Superannuation Fund need to be greatly increased, not from income tax, but from land tax, capital gains tax, inheritance tax, and gift tax.
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