SPEAKER_01 0:10

Hello and welcome back to that Homlon Hub. I'm joined by Elizabeth. Hello, Elizabeth. Hello. Nice to be back. Nice to be back. Nice to have you back. So, today,

Setting The Retirement Agenda

SPEAKER_01 0:20

what are we going to talk about?

SPEAKER_02 0:22

Well, we were talking another time about retirement in New Zealand compared with overseas. So, did we want to go a bit deeper into that?

SPEAKER_01 0:29

Yeah. Okay. That's a cool one. All right. I had a little assistant to look at some information for us. Look, guys, if any of this is wrong, please reach out and let us know. Any feedback is feedback. But let's quickly look into Australia versus New Zealand and what you get.

SPEAKER_02 0:46

Because people do have this sense that in Australia you're paying so much more throughout or getting so much more from your employer as well, the contribution rates for super is a lot higher. And I think if they, you know, if they tried to introduce an 11% contribution rate in New Zealand, people would be freaking out.

unknown 1:04

Yeah.

SPEAKER_02 1:05

Going from our current 3%. But their whole system is a little bit different, right?

SPEAKER_01 1:10

Yeah. It looks like the whole system is very, very complex. So for instance, let's start right at the beginning. The pension in New Zealand, the moment you reach 65, most

NZ Super Versus Australia Means Testing

SPEAKER_01 1:20

of the people are eligible, unless they're like my mom who hasn't really lived here and she comes and goes, and they're like, you gotta stay in the country for at least 10 years to qualify for the pension. Fair enough. But most of the New Zealanders that have worked hard all their life in New Zealand, normally they would qualify for New Zealand pension. So 65, they get about $600 per week for a single person. Yeah.

SPEAKER_02 1:41

And then it's it's adjusted whether you're single or a couple, right?

SPEAKER_01 1:44

Yeah. And it's not income tested, it's not asset tested.

SPEAKER_02 1:50

So I think it might be our only universal benefit, essentially. It's the only thing that we don't means test.

SPEAKER_01 1:58

Yeah. So yeah, you're right. Because everything else is gets income tested. Yeah. Yeah. But this one doesn't. So if you are a property magnet and you've got like 20 properties and you've got all this rent coming in, and you've got all this managed funds and the Kiwi Saver and everything else, you will still get that pension.

SPEAKER_00 2:17

Yep.

SPEAKER_01 2:18

So some people might think, that's not fair. But then some people might think, well, I worked hard. I worked hard to get it. So either way, they get it. But in Australia, on the contrary, it's income tested and asset tested. So they see what you've got coming, what assets you have, etc. etc. So you may not qualify for the government super.

SPEAKER_02 2:42

And I think that would be huge if they did that here because people might not have a high income, but we tend to be quite like asset rich in the fact that we have such a leaning towards property. And so that would really shift the balance of how we support people in retirement if we started taking into account the assets, which a lot of people I would say they're intending for that to go to their children and their grandchildren, then not expecting that to count against them. So it'd be really fascinating to know how that's different in Australia in terms of that intergenerational planning.

SPEAKER_01 3:18

Yeah, that'll be interesting because immediately my mind goes to wow, if you're a person, you had all these properties, but you wanted to pass them on, would you be selling them? Then would you be getting getting rid of your assets and income?

SPEAKER_02 3:31

Yeah, potentially at an earlier age before you hit 65 and start getting means tested. Yeah. Exactly.

SPEAKER_01 3:38

How mean you are. Sorry, how your income. How wealthy you are. I love it. Okay. And then the other one is they're looking at. What do we look at? So we looked at the differences in contributions. So for instance, in New Zealand,

Contributions: 3–4% NZ vs 11–12% AU

SPEAKER_01 3:55

we have 3% contribution going up to four. In Australia, it's 11 going to 12.

SPEAKER_02 4:01

Yeah.

SPEAKER_01 4:02

Next year it's going to be 12%.

SPEAKER_02 4:04

If you think of how much Aussies are going to have when they hit 65, it's a lot more than we generally have. It's more than double.

SPEAKER_01 4:12

Well, I mean, easily, you know, 3% versus 11. Yeah, they're definitely going to have three to four times more money in their Kiwi Sabres Managed Tunes, retirement funds by the time they retire versus our average New Zealanders.

SPEAKER_02 4:25

Which I think is something that we don't take into account. Like we we've always had the super. The super's been universal, so there's a sense that we will be looked after in retirement, which is a really good foundation. And then 16 years ago, we finally brought in KiwiSaver. We were quite late to the game with having a superannuation scheme. Like Australia has been going for longer with theirs, which is why it's a more mature system and the UK and everywhere else. And so now people are like, well, I'm in Kiwi Saver, I'm gonna get the pension, so I'll be fine. But actually a lot of people get to that age and they're not fine because if you've just been putting in 3% Kiwi Saver, and potentially, especially for women, if you've had gaps in your career along the way.

SPEAKER_01 5:10

Yeah, and remember we talked about that paper, that the research that came out, right? The life cycle of a woman's journey because she would be the one taking off time usually to look after.

SPEAKER_02 5:22

Yeah, careers. So it really impacts anything where it's just a percentage of your income, which kiwi savour it's.

SPEAKER_01 5:30

Yeah. Do you want to hear a fun fact? So in Australia, the superannuation started in 1992. 1992. Versus New Zealand, it kicked off in 2007. Yeah. So that's 15 years later. So we're like 15 years behind, basically. We are to be honest, I actually thought theirs was even older than that. But no, it says well, it was voluntary before that. So people could be part of the scheme, but it was voluntary. And then from 1992, they made it compulsory. Right. More like what we have with Kiwi Saber, where you have to opt out rather than opt in. Correct. And other fun fact is their ones started around 3% when they first started. So 23 years ago, they were also doing 3% contributions. And then 15 more years we could be at 11%. Yay! Prepare for that. Yeah, and but it's really interesting because they actually had a big jump because by 2002, so 10 years later, they were already at 9%. So we're quite behind.

SPEAKER_02 6:33

They went quite quickly.

SPEAKER_01 6:34

Yeah, so we're quite behind. And now by 2021, they were at 10%. By 2023, they were at 11%. And now they're sitting at 11.5%. And apparently next year they want to go to 12%.

SPEAKER_02 6:47

I think Kiwis have a really

KiwiSaver’s Limits And The Case For Flexibility

SPEAKER_02 6:51

interesting approach when it comes to their money, though, and that we're very protective of anything we've earned. And so anything, whether that's tax where it's going for kind of like communal good or something like Kiwi Saver for where it's going for our own futures, anytime there's a suggestion that we take more out of our actual pay packet that comes home with us, we have a really strong reaction. We we really push back against that and say, no, no, I can't afford my lifestyle if you take away another couple of percent.

SPEAKER_01 7:20

Yeah. Because we started at one. They started at three, we started at one.

SPEAKER_00 7:25

So just saying that I think the expectations started at completely different levels. Yeah. Um, I think that's that's very true. And and now, like 10 years later, we're just getting to street to 4%. 16 years later. So I think your calculations are slightly off. I don't think it will be in 15 years, it's gonna be like 30. Yeah, yeah.

SPEAKER_01 7:47

I think we're slowly, slowly getting there. But that's just, you know, case in point, right? Like how they're tracking versus how we're tracking. And yes, as we talked about before, is the grass really greener on the other side? And should people really be investing now? And why should they be investing now? So open question to you, Elizabeth.

SPEAKER_02 8:04

Yeah, and I think that's where it's great that people have their Kiwi Saver and it's gonna go to 4%, and that's gonna help. And we we want to think that the pension is gonna stick around for another 30, 50, however many years, but that's not gonna be sufficient. And so a lot of my conversations with people are either people who know that it's not enough and they've been maybe putting 10% into their Kiwi Saver voluntarily, but then that is locked away all the way till 65, if they've already bought their first home, which a lot of them have, or they just putting in the minimum to KiwiSaver, but they kind of have the sense that they've got a bit of extra money every pay and they should be doing something with it, but they don't know where to start. And that's where the conversation around managed funds comes in because KiwiSaver is just a managed fund with extra government rules. And so these people who feel like they don't know how to invest, they don't know where to start, they're already doing it. They just need someone to guide them into how else they can be accessing that same investment tool. And one of the great things about it is that not everybody wants to work right up until 65 and then stop. Sometimes people want to stop earlier, reduce hours, be part-time, have a career shift, take sabbaticals, all of these things. And Kiwi Saver,

Managed Funds, Tax, Liquidity, Diversification

SPEAKER_02 9:20

because it has this focus on we need to support people in retirement, as in after age 65, it doesn't allow you that flexibility. Whereas if you've been funneling your money into an equal, equal investment fund in the sense that it's it can be the same amount of risk, it can be the same amount of diversification, it's the same level of tax efficiency, but it has more flexibility. It can be tailored to what your goals are for your career and lifestyle, then that's gives you so much more control over building that wealth for the future and somewhat protects it from potential changes in KiwiSaver also, because we've seen with the changes this year that the government can mix up the rules if they want to. So even though that KiwiSaver money that you've already got is definitely yours, the way it's going to be kind of managed can be changed by different governments' opinions on how it should go. Whereas the managed funds tend to be less of a political football than property or KiwiSaver. And you're more in control of that, right? Exactly. Yeah. It just gives you that control and flexibility. So people think that maybe it's going to be taxed highly. It's not. The ones I use are still pie tax, which is the same as your KiwiSaver. So 28% is that top tax rate. They are very, we call it liquid, but they're accessible. You can make a withdrawal in sort of five business days. You can get some some or all of your money out if you need it. And yet they're incredibly diversified. So it mitigates that investment risk. So I've seen a lot of people who are investing in Sharzies, which is really great because that's been such a low entry point for people, so accessible, really like promoting investment. But if you're stock picking yourself, it's not very diversified. If I just have 10 companies that I've bought on Shares and I'm trying to keep track of what's happening with them and should I buy more or less or any of that, that's a lot of work for me. And I, even as a financial advisor, my expertise is not in creating a portfolio of funds. That's what literal fund managers do day in, day out. So that's why we would talk to people about being a managed fund where someone else has created this portfolio, they're actively managing it a lot of the time. They're keeping across what's happening in the economy, what's happening with government rules, what's happening with politics, everything. And they're adjusting it for you. And then that manages your risk a lot more.

unknown 11:50

Yeah.

SPEAKER_01 11:51

Nice. I'm like, I'm just so captivated. And I kept thinking about my own shares. And I treat shares as my online impulsive purchases. Yes. So when I have an urge to spend money, I go into shares. Instead of online shopping, you buy shares. Yeah. Yeah. So I've tried to retrain my brain. So instead of buying something on Facebook ad because it pops up and it looks amazing. Like the other day, there was this lead that popped up, and like you can use it to train your dog not to, you know, pull. And I was like, oh, that's like a really cool purchase. How much is that? Oh, 200 bucks. All right, let's go to shares this. So um, so I'll jump onto shares

Sharesies As “Fun Money” Versus Strategy

SPEAKER_01 12:30

and I'll spend that money buying whatever shares. I'll just press a button. I don't care, I don't research, I don't do anything, I just go by gut, gut instinct. I'm like, one of those advisors just goes by gut. This is why I'm not an investment advisor, just saying, I hate uh, you know, just sitting there and analyzing all those different trends of different shares and different equities and stuff like that. So for me, it was like press a button, just go. And that's what shares has enabled me to. But then I also have managed funds and I also have KiwiSaver and I also have properties. And yeah, so there is a whole lot of other things that I'm doing.

SPEAKER_02 13:03

Yeah, and I think that's what we want our clients to be doing. Like Sharesy's is great if that is your fun money, if that gives you a sense of kind of like dabbling in investment and getting comfortable with it. But then having money that you can, you know, kind of rely on a bit more. Obviously, with caveats around anything could happen, but we we know that over time, as long as we are investing for your time frame, then we know that we can make certain predictions and you can rely on that for your retirement savings, for example.

SPEAKER_01 13:35

And yeah. The other thing I wanted to say is that often I compare chairs this to lotto to gambling. Yeah. So instead of buying a lot of ticket, and look, I used to own a lot of store, you know, I could see how often people would not win and we'll have the same regulars buying the tickets, you know, week in, week out, hoping that they will win something. And they just don't. And they spend like $30 on a ticket, $50 on the ticket. Every week. Right? And I'm like, you might as well uh invest that money into Sherzies.

SPEAKER_02 14:00

Yeah. I think that's a great suggestion uh for anyone who really like gets that satisfaction out of buying Lotto, is you could put that into Sherzies and get the same or similar kind of sense of, well, this could lead to me being really rich in the future. You know, you probably have better chances of getting some return rather than no return. Exactly. Buying lotto tickets.

SPEAKER_01 14:22

Exactly. Exactly. So now that's really cool because I think it's really, really important for people to understand at what point they should even be thinking

Start Investing When Life Costs Drop

SPEAKER_01 14:30

about this and when should they be investing. And as we looked at the stats, you know, by the time they retire, they're not going to have much money.

SPEAKER_02 14:37

Like, I think the earlier you start, the better. And I would say that the when you notice that you've got any surplus in your household income is a great opportunity. And so if you can make a change when a change is already happening is one of my best pieces of advice. So for example, when your kid turns three and they get the 23 hours of early childhood. So if you were paying for full-time childcare before and now you've got 20 hours free, how much are you saving? And if you don't need that to manage your day-to-day expenses, can that be the start of your investing for the future? Or when they go to school? And again, you have that drop in childcare. I'm very much looking forward to my four and a half-year-old aging out of daycare next February. And we'll just have that little bit more surplus that we kind of know we don't need because we're managing now. Could very easily spend that on just going out more or anything. But if we just channel that into that's a great time to start investing. And it often does line up with milestones, like, okay, your kids just started school. Do you want to start a fund for them so that when they get to uni age, if they want to do something, you can help them with that so they have a smaller student loan or anything that kind of makes sense to you. Yeah. Um, or you get a pay rise at work. And instead of just taking the pay rise, you just channel that extra into an investment. So anytime a change is already happening outside of your control, yeah. Use that to link to a change within your control to invest that money.

SPEAKER_01 16:09

Yeah. No, that's a perfect example. Because that's what we say in uh home loans as well, like when the rates go down, yeah, you know, the same. Yeah, the same repayments or or re repurpose that money for something else, like investments. Yeah. Because otherwise they're just gonna go and spend that money.

SPEAKER_02 16:25

Yeah, because it's so easy, it's in your account. Why wouldn't you? That's the easy option.

SPEAKER_01 16:29

So we want to just seize the moment. Absolutely. Awesome, Elizabeth. Thank you so, so much for coming along. And guys, remember if you do have any questions, feel free to reach out to us. We are here for you, for your education.

Wrap Up And Listener Invitation

SPEAKER_01 16:40

And uh, we're about to celebrate, I think, our milestone of two and a half thousand downloads. Congratulations. Yeah, we've been going a year. Oh my god, I think it's been going a year. So I need to double check. But yes, thank you so much and loved having you here today. Thank you. Here's tomorrow. Bye. Bye.