Source: Radio New Zealand
RNZ money correspondent Susan Edmunds. RNZ
Got questions? RNZ has a podcast, Got questions? RNZ has a podcast, [www.rnz.co.nz/podcast/no-stupid-questions No Stupid Questions], with Susan Edmunds.
We’d love to hear more of your questions about money and the economy. You can send through written questions, like these ones, but – even better – you can drop us a voice memo to our email questions@rnz.co.nz
I have often wondered why the Reserve Bank’s primary weapon to combat inflation is mortgage rates.
Firstly, not everyone has a mortgage and, secondly, the well-off and the young are less likely to have mortgages. In general terms, would it not be better to increase KiwiSaver contributions in the short term, then relax them when inflation falls?
Making KiwiSaver compulsory would be necessary, but have a wider effect generally. Putting up mortgage rates simply recycles money back into the banking system.
During the latest increase/decrease cycle the banks’ profits rose significantly. A temporary KiwiSaver increase means people’s savings increase and the money is not simply lost in the current system.
This has been suggested a few times, including by former Revenue Minister David Parker, when he was Labour’s finance spokesperson, but so far, it’s never progressed any further.
I totally understand the reasoning. It would be great to think that my KiwiSaver balance was going up during times when we needed to get inflation under control, rather than that I was just paying more money to the bank in interest.
There are a few reasons why people don’t back the idea though.
One is that it would hit lower-income people hardest. Many are renting, so they are not currently affected by rising home loan interest rates.
Many of them aren’t contributing to KiwiSaver as it is. If we made it compulsory and increased the contribution rate, they could suffer.
People who owned a home with a mortgage would stand to gain the most.
There are also concerns that, if we ended up moving contributions according to what is needed for the economy, it could be harder to get them back to the level required to give people the optimum savings outcome.
Ideally, you want people to save an amount that gets them to the sort of lump sum they want to save in retirement – not the amount that inflation dictates.
Those are some of the arguments. I do think the idea has merit and it may be discussed again, if we move towards compulsion in the future.
I reached retirement age a few years back and stopped my KiwiSaver contributions, but continued to work and therefore my employer stopped their contributions.
I suggested that he should increase my wages by 3 percent, as the company no longer needed to pay contributions to my KiwiSaver. Years earlier, we did not get a wage rise, as the company’s 3 percent contribution was our wage increase, so I suggested it was only fair that the company increases my wage now by 3 percent, as I was no longer getting the contribution to my KiwiSaver.
Of course I did not get the 3 percent, which was my expected outcome. I thought this was just an interesting thing for you to note.
That’s right, at the moment, employers do not have to keep contributing to the accounts of people who are over 65.
It does seem unfair. Someone doing the same job can end up effectively paid less.
The government contribution also stops, but that makes more sense to me. If you are getting NZ Super, it is reasonable to not also receive the $261 a year from the government into KiwiSaver.
I would like to know how to make some modest inheritance money grow (not mine) and safely (again, as it’s not mine), even in government-guaranteed investments (if this is still a thing or how to tell).
Rather than get into the details as to whose money it is, I am a signatory to their NZ bank account. I have no clue about investing, but want to make their money grow, rather than let it sit there, and to make up for the occasional withdrawals, as it is moderately dwindling.
We try not to use the money in their savings account, but make occasional transfers to their everyday account, if they are short on funds. Additionally, what happens when they die?
Our lawyer created a will some time ago, but didn’t get back to me last year, when I emailed and asked them to remind me of the process when they die. I don’t have final say of their assets – that goes to my sisters.
The will was created by a major Wellington law firm.
If you have the money in a savings account at the moment, there are a few ways you could get a better return on it.
You could look at term deposits. They are very low risk, which it sounds like you are looking for.
You might consider a cash or conservative managed fund. You might get some balance movement in a conservative fund, but it should deliver better returns than a savings account over time.
You mention government guarantees. If you are looking for government-backed investments, you can buy Kiwi Bonds, which are basically lending money to the government.
At the moment, a Kiwi Bond with a one-year maturity pays 2.5 percent.
We also now have a Depositor Compensation Scheme, which gives you up to $100,000, if your money is in a savings account, transaction account or term deposit with an organisation like a bank or finance company that fails.
I would really recommend getting some advice on the best thing to do with the money though.
In terms of what happens when the person dies, Public Trust principal trustee Michelle Pope says the account will pass to any joint accountholders and won’t be part of the person’s estate.
If there is no joint accountholder and only authorised signatories, this ends when the account holder dies.
“The bank account then forms part of the deceased person’s estate and will be administered accordingly.”
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