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Freelance articlesMary is occasionally commissioned to write freelance articles. Here are some of them.NZ Herald article January 17 2008: Perspectives article on poor KiwiSaver performanceEarlier Herald article criticising KiwiSaver is misleading for two reasons.I feared this would happen. Share markets would go through one of their down periods right after KiwiSaver started, and people would leap to the conclusion that the retirement savings scheme was not a good idea. Sure enough, a story to that effect featured prominently in the Weekend Herald's Business section last Saturday. The story, quoting a former high school maths and economics teacher, began "KiwiSaver has so far been a KiwiLoser, eroding more wealth that it is creating." That is grossly misleading. Anyone who avoids KiwiSaver because of it is doing themselves a big disservice. Before we look further at that, it's important to acknowledge that there's plenty to criticise about KiwiSaver: · Michael Cullen and Peter Dunne should be challenged about their enthusiastic announcements of the numbers who have signed up. Most recently, they said 381,000 had joined KiwiSaver in its first six months - far more than the 276,000 expected for the first full year. But where did the 276,000 come from? Before KiwiSaver started, Inland Revenue said 700,000 New Zealanders change jobs every year - almost all of whom will be automatically signed up for KiwiSaver in their new jobs. These people can opt out after two to eight weeks. But early data show roughly half are sticking with the scheme - and well they might, given the incentives. Let's guess at 225,000 out of 350,000 for the half year. Add to that the rush of people savvy enough to realise they would be mad not to join KiwiSaver- and the sooner the better - and 381,000 in the first six months seems disappointing rather than exciting. I can't help but wonder if the government set the first-year goal at 276,000 so they could repeatedly say, in an election year, "Wow, aren't we doing well." · The scheme shows many signs of being put together in great haste. One example: the name of the tax credits. Many people think they can't take advantage of them because they don't pay tax. But the credits in fact have nothing to do with tax. The government simply puts the money in your KiwiSaver account. And there are many other KiwiSaver features that could have been simpler or more efficient if officials had been given more time to develop them. What was the hurry? Again we must cast our eyes towards the end of this year. · Through KiwiSaver, the government is spending huge amounts of money persuading thousands of people to do what they were going to do anyway. Many of us who were already saving for retirement have simply moved some of that saving into a KiwiSaver fund, grinning as the $1000 kick-start and $40-a-year fee subsidy are added to our accounts. Our grins will be even wider when we get our first tax credits - up to $1043 a year - some time after July. And employees will be happier still, when compulsory employer contributions start in April. Sure, there are undoubtedly thousands of others who have joined KiwiSaver who weren't saving before. But who knows how many? Over all, it's not clear that KiwiSaver is a good use of taxpayer money. For individuals, however, it's a different story. It's crystal clear that contributing to KiwiSaver is a great use of their money - regardless of the poor recent share market performance noted in last Saturday's story. The story quoted former teacher Gary Osborne, who searched websites and found that in all but 5 of 24 KiwiSaver funds, "savers would be better off if they had slept with their funds under the mattress for the first six months of operation, before allowing for the government contribution." But let's look more closely at his last six words. They make all the difference. The whole point about KiwiSaver - the reason I and others say everyone should be in it - is that the government contributions turn any otherwise mediocre investment into a really good one. Not allowing for them is like celebrating Christmas without Santa Claus. There's another important issue here, too. It's a big mistake to judge any investment that includes shares over any period less than about ten years - let alone six months. And it's actually just three months, as KiwiSaver providers didn't get the money until October. Before that it sat in Inland Revenue, earning interest. The share market often declines over short periods, but the long-term trend is always upwards. It's rare for people who invest in shares or share funds to lose money over ten or more years, and common for them to do extremely well. And that's before adding the KiwiSaver incentives. Still, some people - presumably including Osborne - can't cope with seeing the value of their investments fall. For them, there's a great alternative: a conservative KiwiSaver fund that invests in stable assets such as bank term deposits and government bonds. Such funds won't grow nearly as fast as riskier funds over the long term. But by the time you add the KiwiSaver incentives, you can be confident you will do better than in a bank account - let alone under any mattress. NZ Herald article December 19 2007: Concern over remarks on old-age support largely unwarrantedPeople should not be put off joining KiwiSaver because entitlement may eventually occur laterMy biggest concern about Diana Crossan's discussion about raising the NZ Super age and cutting KiwiSaver incentives is that it will discourage some people - especially the financially unsophisticated - from joining KiwiSaver. There's not much logic behind the discouragement. True, raising the NZ Super age will also raise the age at which KiwiSaver members get their hands on their money. But such a change would be phased in over many years, probably affecting only those currently in their 40s or younger. For them, adding a year or two to a tie-up of 20-plus years ought not to make much difference. As for reducing KiwiSaver incentives, that's all the more reason to join now and grab the $1000 kick-start, annual tax credits and employer contributions while the going is good. But what if the incentives are lowered and you're stuck in the scheme? Not everyone realises that you can put KiwiSaver on hold if you no longer wish to take part. Employees can take contributions holidays after a year of membership. And everyone else - beneficiaries, the self-employed, early retirees and other non-employees - can simply stop contributing whenever they want to. "OK," say the suspicious. "But a future government might cancel contributions holidays?" That would surely happen if KiwiSaver became compulsory - at which point everyone who has already joined would be glad they were members while the incentives were available. Short of compulsion, though, I have trouble picturing a government cancelling contributions holidays. It would be seen as hugely unfair, giving rise to sad stories in the media of struggling families who would have been okay if they had never joined the scheme. And what kind of message would that send to people who had not joined KiwiSaver? Nobody else would sign up. Don't forget, too, that up to a point, the more people contribute the more the government has to contribute. Cancelling contributions holidays would cost the government plenty. Similarly, other possible future changes to KiwiSaver shouldn't put anyone off joining now. For example, Crossan considers - although unenthusiastically - the possibility of income testing NZ Super. Such talk can lead some to ask, "If the government is going to cut my super because I've got income from KiwiSaver, why should I bother with KiwiSaver?" My reply: If income testing was introduced, I'm sure the government wouldn't cut NZ Super by a dollar for every dollar retirees receive from their savings. Again, think of the message that would send to non-KiwiSavers. It's more likely to be 30c or 50c less Super. Savers would still be much better off than non-savers. And those hell bent on getting every last buck from the government should realise they will probably get more by being in KiwiSaver than out. For many, the incentives will outweigh any reduction in NZ Super. While you might not feel totally reassured by Labour and National's protestations that NZ Super won't change, don't let doubt keep you out of KiwiSaver. It's actually all the more reason to join. NZ Herald article May 22 2006: Readers sound off about proposed international tax changesReaders of the Money column in the Weekend Herald have sent Mary Holm an unprecedented number of letters commenting on the government's proposals to change tax on investments. The following are edited excerpts:* Various people in the Reserve Bank and the Government have previously urged us all to stop over-investing in housing and to employ our capital more productively so that New Zealand can pay its way in the world. What could be better for New Zealand than overseas investments that return foreign exchange, profits and dividends and capital gains back to New Zealand? Shouldn't they be trying to encourage this kind of saving in a similar way to encouraging exports and so on? * I applaud this Labour government for changing the tax treatment of New Zealand investment funds to be the same as direct investment. This sector has long been penalised with poor returns, which is one of the reasons it has been shunned in favour of investing in real estate. But I have no doubt the proposed tax on 85 per cent of the change in value of foreign funds and investments (ex Australia), will now cause that sector to be shunned. It is not true to say that only "sophisticated wealthy investors" will be affected. It will penalise anyone with savings in a fund or superannuation scheme diversifying offshore.... I implore the government to retain the status quo. Why would this government wish New Zealand savers to reduce their diversification, which has been useful in smoothing volatility, especially when Telecom shares have lost 20 per cent of their value in the past week? Does this government wish to risk re-igniting the already overvalued housing market, further reducing affordability for young people? * Why should savers be restricted to just 2 per cent of the global equity market, which is what New Zealand and Australia amount to, particularly when Australia refuses to accept full exchange of imputation credits, and both governments are busy destroying shareholder value in the power, power distribution, gaming, minerals and telecom industries through heavyhanded regulation? * The following was recently posted on a UK website. "Has any consideration been given to the effect on well qualified, well heeled, foreign nationals coming to work and reside in New Zealand ... or indeed those already there? Why would anyone who wishes to keep some investments in their home country, for whatever reason, want to get involved in all this nonsense? "And what about all those Kiwis currently living and working abroad and with assets outside New Zealand? This is yet another inhibitor against them returning and helping build the home economy and the nation. "But possibly the biggest unforeseen consequence will build up for the future. If Kiwis repatriate their long-term overseas savings and invest them disproportionately in New Zealand there'll be fewer overseas divis to help pay for their superannuation and eventual retirement.
* My wife and I are retired Americans who immigrated here a few years ago and
* I have heard the new tax on overseas investments described as an incentive to 'bring money back to New Zealand' but for many investors like myself the money never 'belonged' here in the first place.
However, I left some investments in the UK which I would like to retain, in case I should ever decide to return there and because I wish to will part of my estate to UK beneficiaries. I now face a choice of either selling these investments or spending a good deal of time and expense in meeting the proposed tax requirements. * Only yesterday, an international sharebroking firm with operations in New Zealand was quoted on a financial website recommending Australian-listed Newscorp and BHP Billiton as a way of getting exposure to international business operations while avoiding the new tax.
Unfortunately, Newscorp is resident in the USA, hence the new tax will apply. In the case of BHP Billiton, its shares are a hybrid security based on two underlying entities, one resident in Australia and one in the UK. No one has yet been able to tell me how this might be treated. Are New Zealanders bad savers? It's all in the way you look at lifeKey Points
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