Are we better off putting it all in our KiwiSavers? Or a managed fund? We would like to have a bit more money to live our current lives, as we have been very sensible with our money.<\/p>\n
A: Your last sentence is the clincher.<\/p>\n
I expect you bought the rental at a time when property values were growing really fast. But Auckland house prices reached a peak in early 2022, fell over the next year or so and haven\u2019t really gone anywhere since.<\/p>\n
It\u2019s hard to imagine that flat line will continue for the next 20 years, but most experts aren\u2019t predicting a return to rapid growth.<\/p>\n
Meanwhile, of course, we can\u2019t predict what will happen to balances in KiwiSaver or other managed funds either. It\u2019s quite possible growth in shares and bonds will be slower than in houses. Or both types of investments will boom. Who knows?<\/p>\n
In the absence of a crystal ball, there\u2019s a lot to be said for choosing the investment you prefer. It sounds as if you feel weighed down by those mortgage payments \u2013 and perhaps the feeling that you\u2019re getting nowhere with the interest-only loans. Sell the rental and get rid of the debt!<\/p>\n
You\u2019re in a pretty strong financial situation for people your age. I suggest you put some of the freed-up money in either KiwiSaver or a managed fund \u2013 it doesn\u2019t make much difference which, except you have access to a managed fund. But do spend some on fun.<\/p>\n
Rebuild after redundancy<\/p>\n
Q: I was made redundant over a year ago and since then I have been doing a mix of casual work and contract work, along with having some family support to survive on my journey back to fulltime employment.<\/p>\n
I have KiwiSaver and an investment fund which have remained untouched during this time. Last year, I was able to contribute the minimum amount to KiwiSaver to enable me to get the Government contribution before it decreased.<\/p>\n
I paid off my student loan years ago and don\u2019t have any hire purchases or other loans. I own my own home and have a mortgage, so this has been a challenging time.<\/p>\n
What would you suggest I do to rebuild my savings quickly and what I should focus on to rebuild financially? I\u2019m in my 40s and while retirement is still quite a way off, my goal is to retire comfortably.<\/p>\n
I know there are many others like me in this situation, and unless you\u2019ve been made redundant, you aren\u2019t always aware of the financial impact it can have.<\/p>\n
A: Well done, you! It\u2019s great that you\u2019ve managed without using your investments and have even put a small amount into KiwiSaver.<\/p>\n
You might want to keep up the KiwiSaver contribution \u2013 perhaps setting up an automatic transfer of $20 a week so you continue to get the maximum $261 a year from the Government. While that\u2019s only half of what it used to be \u2013 and a quarter of what it was for many years \u2013 it still multiplies your contributions by 1.25, which is a good boost.<\/p>\n
Beyond that, I suggest you talk to your mortgage lender about using any available money to pay your mortgage down faster, with the ability to withdraw that money again if you need to.<\/p>\n
It\u2019s a good way to set aside emergency money, in case your income stops for a while. And paying down a mortgage fast is the equivalent to earning whatever your mortgage interest rate is on that money, and there\u2019s no tax. It\u2019s a good, solid investment.<\/p>\n
You may have to wait until a fixed term has ended to set this up, storing the money up in a savings account or term deposit in the meantime. But small extra payments are often permitted during a fixed term.<\/p>\n
Some would say you might be better off putting that money into KiwiSaver or your other fund. It depends whether the future return \u2013 which nobody can predict \u2013 is higher than your mortgage interest rate and whether you want to take that \u201cgamble\u201d.<\/p>\n
KiwiSaver for granddaughters<\/p>\n
Q: ASB tells me it is not possible to transfer money from my Kiwibank account to my granddaughters\u2019 ASB KiwiSaver accounts.<\/p>\n
The only option offered is to draw cash and make counter deposits, which is a bit tough for 87-year-old grandparents and requires an ASB profile.<\/p>\n
If our granddaughters were to change KiwiSaver provider, do any of the low-fee providers you favour accept bank transfers?<\/p>\n
A: Some wires have got crossed here.<\/p>\n
\u201cYour reader can absolutely make a bank transfer from their Kiwibank bank account into their grandchild\u2019s ASB KiwiSaver account, via their bank\u2019s online banking services, by searching for \u2018ASB KiwiSaver Scheme\u2019 as the payee, or at their bank\u2019s branch,\u201d ASB says.<\/p>\n
\u201cThey can set this up as an automatic payment or do a one-off payment, using the grandchild\u2019s KiwiSaver number, grandchild\u2019s IRD number and grandchild\u2019s surname as the references.\u201d If you need more info, it\u2019s on the ASB website.<\/p>\n
\u201cWith regards to further instructions on the process via Kiwibank\u2019s online\/branch banking services, we suggest you reach out to Kiwibank.\u201d<\/p>\n
The bank adds: \u201cWe\u2019re sorry your reader has received inaccurate information regarding this issue. We\u2019d be more than happy to support them via retire@asb.co.nz.\u201d<\/p>\n
I hope you can set up the contributions for the girls. It\u2019s a great idea to drip-feed even a small regular amount into a child\u2019s KiwiSaver account. It\u2019s surprising how it grows over the years.<\/p>\n
And once a teen is 16, their account will receive 25 cents from the Government for every contribution into their account, up to $261 if contributions total $1043 or more a year. The contributions can be from anyone.<\/p>\n
Isn\u2019t it just dating?<\/p>\n
Q: I was bemused by the concept discussed in your last column, live-apartnerships. Isn\u2019t this what anyone else would call \u201cdating\u201d? What\u2019s the difference?<\/p>\n
A: There\u2019s no official definition of a live-apartnership. It\u2019s just a word I made up! But I thought we needed a term because it is, indeed, different from dating.<\/p>\n
When you\u2019re dating, there tends to be an expectation that the relationship will either develop further \u2013 perhaps into living together or marriage \u2013 or it will end.<\/p>\n
A live-apartnership tends to be a steady relationship that both sides are happy to leave as it is, maybe over many years.<\/p>\n
Typically, the two people get together most evenings or weekends or whatever works. In between times, each one runs their own home, pays their own bills, and lives most of their lives in whatever way they choose.<\/p>\n
\u2018Coming after my savings?\u2019<\/p>\n
Q: This is not a formal letter, however, I have an observation for you, around the clarity of your response to the live-apartnership question in your last column. In the questioner\u2019s penultimate paragraph was a specific question about \u201canyone coming after my savings\u201d.<\/p>\n
As I understand it, including from the MSD response you reported, the testing of joint assets is undertaken for the purpose of deciding whether people (her male \u201cpartner\u201d in the example) would qualify for entitlement to the residential care subsidy. I don\u2019t believe there is any suggestion someone would be looking to take her savings. Although, if he and his trust ran out of funds for his future care, and her level of savings did in fact mean he didn\u2019t qualify for the subsidy, then she might be inclined to assist him. Apologies if I\u2019ve misunderstood the matter.<\/p>\n
A: You\u2019re quite right. And it\u2019s a point I should have made last time.<\/p>\n
Of course the Government cannot take somebody\u2019s savings to use to support someone else!<\/p>\n
Here\u2019s what happens. When a person is going into long-term residential care in a hospital or rest home, they can apply to the Ministry of Social Development (MSD) for a residential care subsidy to help pay for that care.<\/p>\n
The ministry will look at their assets and income then pay the subsidy only if they are below the thresholds. If the person has a partner, the partner\u2019s assets will be included.<\/p>\n
As the MSD said in my last column, its 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
So it\u2019s not a matter of the Government taking anyone\u2019s money. But if the person going into care has a spouse or similar, the Government basically says: \u201cWe expect you and your partner to support your care until your joint assets drop below the threshold. Then we\u2019ll step in to help.\u201d<\/p>\n
One other point about the reader\u2019s letter: she assumed her partner would be the first to need residential care, presumably because her health is better than his. But it doesn\u2019t always work out that way.<\/p>\n
Slow process<\/p>\n
Q: I\u2019ve recently transferred my KiwiSaver into a low-fee passive fund.<\/p>\n
The provider, Simplicity, has a front-of-app section that shows recent transactions. I\u2019ve noticed that it takes about 10 to 12 days for my and my employer\u2019s contributions to show up, and then they sit pending for about three days before the funds are actually added to my balance. That\u2019s more than two weeks from when I was paid.<\/p>\n
Previously, I don\u2019t know how long it took for transactions to show in my balance, essentially because I was with another provider and it wasn\u2019t so transparent in their app.<\/p>\n
Do you know why there\u2019s such a delay with Simplicity, in a time when moving money around has become much, much quicker? And who is earning the interest while that money is not in my KiwiSaver ?<\/p>\n
A: Your money takes a bit of a journey on its way to your KiwiSaver account. And, it seems, it\u2019s not fair to blame the provider.<\/p>\n
\u201cA delay of 10 to 12 days from payday is possible,\u201d Jennie O\u2019Donovan at Simplicity says, \u201cbut this part of the process happens largely before the money reaches Simplicity.<\/p>\n
\u201cEmployee and employer contributions are deducted through payroll and paid to Inland Revenue, which then processes and forwards them to the member\u2019s KiwiSaver provider.<\/p>\n
\u201cThe timing depends partly on the employer\u2019s payment cycle. Employers pay deductions to Inland Revenue either monthly or twice monthly, although they may choose to pay more frequently.<\/p>\n
\u201cInland Revenue advises that employer and employee contributions can take up to a month from the date they\u2019re deducted to appear in a member\u2019s KiwiSaver account,\u201d she says. Once the money gets to Simplicity, it \u201cgenerally appears as a pending transaction within two working days, and can be seen in your balance within three to four working days\u201d.<\/p>\n
\u201cThe provider identifies and reconciles the payment, applies the appropriate unit price and allocates units to the member.<\/p>\n
\u201cSimplicity uses the unit price for the day the funds are identified as cleared in the fund\u2019s bank account.<\/p>\n
\u201cBecause unit prices are confirmed after the assets and transactions have been valued and reconciled, there is a short delay before we can confirm the number of units purchased and display the completed transaction.\u201d<\/p>\n
In response to your question about interest earned, she says: \u201cInland Revenue pays interest attributable to the member on employee and employer contributions while they are held in its KiwiSaver holding account. Inland Revenue passes that interest on for the member\u2019s benefit and it is credited periodically.\u201d<\/p>\n
I asked O\u2019Donovan: \u201cDoes it take a similar amount of time for other providers?\u201d<\/p>\n
Her reply: \u201cThe employer-to-Inland-Revenue part of the process is common to all KiwiSaver providers, so members of other schemes can experience similar delays.<\/p>\n
\u201cIndividual providers may have different reconciliation, unit-pricing and display processes once they receive the money.\u201d<\/p>\n
She adds: \u201cSimplicity\u2019s app may make the different stages more visible by showing the contribution as pending before it is fully reflected in the member\u2019s balance.\u201d<\/p>\n
It\u2019s a fair point. <\/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. 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