In my case, we own and live in separate homes, occasionally sleep over, go on holiday together. Mostly eat dinner at one or other\u2019s place.<\/p>\n
Our finances are totally separate. We will buy each other lunch or dinner on an ad hoc basis. My assets are not in a trust, but my friend\u2019s are. He has KiwiSaver of about $200,000 and mine is about $50,000 at present.<\/p>\n
He\u2019s a he and I\u2019m a woman! I suspect that still makes a difference even today!<\/p>\n
When he inevitably gets put in a rest home with no real assets due to the trust, will anyone be coming after my savings? Or my term deposits or house?<\/p>\n
I hear opting-out agreements like a prenuptial won\u2019t stand up.<\/p>\n
A: This is a tricky issue, and your situation is becoming increasingly common, as more and more 65-pluses have what might be called \u201clive-apartners\u201d.<\/p>\n
Your summary of the law is correct, Graham Allpress of the Ministry of Social Development (MSD) says.<\/p>\n
\u201cWhen a person applies for assistance from MSD, we need to consider their relationship status and other family circumstances.<\/p>\n
\u201cMSD\u2019s role is to check whether people qualify for a residential care subsidy by performing a \u2018financial means assessment\u2019.<\/p>\n
\u201cTo get the subsidy, a person\u2019s income and assets must be under a certain amount. If they are in a relationship, the combined income and assets of both parties must be under a certain amount.\u201d<\/p>\n
There are two issues for you and your partner. One is whether you are \u201cin a relationship\u201d for these purposes? But there are also questions around your partner\u2019s use of a trust.<\/p>\n
\u201cA trust can have an impact on a Residential Care Subsidy, because clients need to use the resources available to them before seeking financial assistance,\u201d Allpress says. \u201cWe might expect a trust to provide resources to the client to help pay for their care.\u201d For more on this, see tinyurl.com\/MSDTrusts.<\/p>\n
This seems fair to both you and taxpayers in general. It doesn\u2019t seem right for people to use government funding for their care while they have money in trusts.<\/p>\n
What about your savings?<\/p>\n
Allpress says the Ministry of Social Development\u2019s position is based on \u201cthe notion that for a person who is married, or living in the nature of marriage, spouses and de facto partners owe primary obligations of support to each other, and that the state\u2019s support obligations are secondary\u201d.<\/p>\n
When considering whether a client is in a relationship, Work and Income looks at the couple\u2019s emotional commitment and financial interdependence.<\/p>\n
Emotional commitment includes:<\/p>\n
\u201cclient perception \u2013 the client and the other adult see their relationship as a relationship in the nature of marriage or civil union; they consider the relationship is likely to continue;\u201cpublic perception \u2013 they are viewed as a couple by their community (this may include their family, local church, sports clubs etc);\u201chistory \u2013 the length of time the client and the other adult have known each other and\/or have resided at the same address; shared children.\u201d<\/p>\n
Financial interdependence includes:<\/p>\n
\u201cjoint bank accounts, assets or joint loans\/credit;\u201cjoint ownership of real estate or other major assets and any joint liabilities, eg both the client and the other adult own a rental property;\u201csignificant pooling of financial resources, especially in relation to major financial commitments eg saving for a house, car or holiday.\u201d<\/p>\n
For the complete lists, see tinyurl.com\/EmoCommitment and tinyurl.com\/FinInterdependence.<\/p>\n
Allpress adds: \u201cEveryone\u2019s situation is different. We would encourage anyone with questions to get in touch with us to talk through their situation.\u201d<\/p>\n
\u201cYour letter writer can contact the MSD main helpline (0800 559 009 ) or the MSD Seniors Line (if she is receiving NZ Super) to schedule an appointment with us.\u201d The Seniors Line number is 0800 552 002.<\/p>\n
I asked: \u201cIf they have that conversation with MSD, does MSD keep records of what is said? Or record the conversation?\u201d<\/p>\n
The reply: \u201cIt is our practice to keep a record of our conversations on individual client files.\u201d<\/p>\n
From what you\u2019ve said, it seems to me that you might be off the hook. But it\u2019s not my decision to make! You might want to call the ministry.<\/p>\n
Scrap KiwiSaver?<\/p>\n
Q: If, as your last column suggests, KiwiSaver is regarded as producing inequity, whether compulsory or not, how about adopting the alternative of simply scrapping KiwiSaver altogether?<\/p>\n
I have always believed that superannuation and retirement income is simply about saving enough oneself to meet one\u2019s own needs, including all along the way until retirement.<\/p>\n
I am incredibly frustrated that we are back considering compulsion. Who does it really benefit, other than fund managers?<\/p>\n
There are three categories of retirement savers:<\/p>\n
Those that can afford to and do.Those that can\u2019t afford to and don\u2019t.Those that can afford to and don\u2019t.<\/p>\n
The first two categories do not benefit from compulsion, and why should we care about the third group?<\/p>\n
A: In some ways, it\u2019s hard to argue with what you say.<\/p>\n
But I think you\u2019re overlooking the fact that many people need to be \u201cnudged\u201d into doing what\u2019s best for them financially in the long run.<\/p>\n
It\u2019s a bit like eating well or exercising. Individuals are better off \u2013 and therefore the country as a whole is better off \u2013 if people are healthier. But many people won\u2019t do healthy stuff unless they\u2019re encouraged.<\/p>\n
Of course there are also people who won\u2019t eat well, exercise or save for their retirement, even with inducements. But many do respond.<\/p>\n
I\u2019ve heard KiwiSaver critics say that New Zealanders aren\u2019t saving more since KiwiSaver started, they are just saving in a different way.<\/p>\n
But I don\u2019t believe that. So many people have said to me that they are financially better off because of the scheme. They have also learnt heaps about how markets work and benefited from the fact that KiwiSaver is pretty highly regulated. They\u2019re less likely to be scammed.<\/p>\n
By all means, ponder whether compulsion is good or bad. And let\u2019s look hard at the other KiwiSaver changes being suggested. But I can\u2019t agree that this country would benefit from ending KiwiSaver.<\/p>\n
What if you\u2019re made redundant?<\/p>\n
Q: As a long-time reader of your column, I\u2019m aware of the mantra that regular KiwiSaver contributions maximise long-term returns, and I\u2019ve generally agreed with that approach. However, I\u2019m starting to wonder whether it still makes sense in my situation. I was one of those affected by the Government\u2019s spending cuts when my employer downsized, leaving me unemployed at 59.<\/p>\n
Finding work has been difficult for many people over the past two years, but for someone now in their 60s, it feels virtually impossible, regardless of skills or experience. Fortunately, my wife and I have always been good savers and investors, so we\u2019ve built up a reasonable nest egg. However, as my wife\u2019s contracting income was also affected, we\u2019ve now needed to start drawing on our investments to cover living costs. With no income for the past 12 months, I haven\u2019t contributed to KiwiSaver so will miss out on the government contribution this year. Given the government contribution is now only $261, does it make sense to contribute $1043 from our investments into funds that will remain locked away for another five years? While I\u2019m not worried about running out in retirement, and both the KiwiSaver fund and managed portfolio my living expenses come from have much the same annual return, $261 is still $261.<\/p>\n
A: Redundancy at your age is particularly tough, given the ageism that\u2019s common in recruitment practices.<\/p>\n
Still, I suggest that you \u2013 and your wife, for that matter \u2013 keep putting the $1043 each year into KiwiSaver. As you say, getting $261 is not nothing. And if you have three or four years before you turn 65, it will amount to $1000 or so.<\/p>\n
That\u2019s a grand 65th birthday bash, or perhaps a little birthday trip!<\/p>\n
By the way, in the year you turn 65, the government contribution is proportionate to how much of the July 1 to June 30 KiwiSaver year you are under 65.<\/p>\n
For example, if you turn 65 on January 1, you would be entitled to half of $261. You would need to contribute half of $1043. It doesn\u2019t matter when in the year you deposit your money.<\/p>\n
In or out of KiwiSaver?<\/p>\n
Q: I\u2019m 52 and self-employed and have managed to squirrel away some savings over five years.<\/p>\n
My current KiwiSaver balance is $95,000. I\u2019m in a high-growth fund with Westpac, which is a mid-return and mid-fee structure compared to other providers.<\/p>\n
In that same time, I\u2019ve also put $36,000 into Sharesies, with a current balance of $62,000. Over those five years, my shares have outperformed KiwiSaver every year. I review my situation at the end of each financial year. This year I have chosen to reduce the amount I\u2019m paying into KiwiSaver to the minimum, to receive the government contribution.<\/p>\n
I\u2019m now investing that money into Sharesies. I have a mix of single companies and ETFs [exchange-traded funds]. I have been lucky with some single companies and not so lucky with others.<\/p>\n
My plan is to hang on to the single companies for another five years and, if they haven\u2019t seen significant growth, sell those shares and put the cash into my ETFs \u2013 providing they are not down.<\/p>\n
I also have crypto, which has also outperformed KiwiSaver, but I\u2019m not prepared to risk any more cash on crypto. I was lucky enough to buy metals before this recent surge. With the government KiwiSaver contribution reducing, I really don\u2019t see any benefit to putting more cash into KiwiSaver. When I look at what I was putting in to receive $261, I pay more than that in KiwiSaver annual fees.<\/p>\n
Thoughts? Am I wrong? Self-employed people really do get a rough deal with no company and only a small government contribution. I feel no one acknowledges this \u2013 probably because there\u2019s nothing to say about it. Interested to know your opinion.<\/p>\n
A: Hang on a minute. I\u2019ve been acknowledging the raw deal for the self-employed for some time now!<\/p>\n
For example, after last year\u2019s Budget, I wrote in this column: \u201cThe biggest losers are probably the self-employed and those not employed. Their only KiwiSaver incentive is the government contribution, and the halving makes it considerably less attractive.\u201d<\/p>\n
I did add, though: \u201cStill, it\u2019s worth getting<\/a>. If you save $20 a week and your savings outside KiwiSaver would have been $100,000, in the scheme they will be $125,000.\u201d<\/p>\n Anyway, let\u2019s look at your situation. Firstly, good on you for putting that money away. Too many self-employed people, perhaps struggling to buy the basics, don\u2019t save.<\/p>\n Should the money go into KiwiSaver or elsewhere? A few comments:<\/p>\n One clear advantage of elsewhere is that you can withdraw the money any time \u2013 unless, of course, you would rather lock it out of the way of temptation!Comparing returns over five years is much better than comparing over a shorter period. But you might still find your KiwiSaver returns topping the Sharesies returns in future. There are no guarantees.Your ETFs are probably passively run and therefore charge low fees. Great!\u00a0 I suggest you move your KiwiSaver to a low-fee provider.You might want to move out of individual shares into the ETFs sooner. The majority of shares perform worse than the market average, while a few do brilliantly. And most people are lousy at picking those winners.I agree that a bit of crypto and precious metals is fine \u2013 but not too much.<\/p>\n So where should your future savings go \u2013 apart from continuing to put enough into KiwiSaver to get the Government\u2019s $261?<\/p>\n Given that we can\u2019t predict whether your ETFs and shares will continue to outperform your KiwiSaver fund, I would be inclined to put half in each. But if you really prefer to concentrate on the ETFs, it probably won\u2019t make that much difference.<\/p>\n * Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a former director of the Financial Markets Authority, the Banking Ombudsman Scheme and Financial Services Complaints Ltd. Mary\u2019s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@maryholm.com<\/a>. Letters should not exceed 200 words. We won\u2019t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.<\/p>\n