Mary’s Q&A column appears in the Business section of the Weekend Herald. Mary was a finalist for the "Best Columnist – General" award for this column in the 2014 Canon Media Awards.
NZ Herald 24 June 2017
Q&As: Some spend too much on fun, but some spend too little
- What to do if employer won't contribute to KiwiSaver
- 2 readers 'self-insure' for health insurance
- Reader glad he had check-up before dropping health insurance
- Another way to keep down health insurance costs
- How have you done in KiwiSaver?
- Win a seminar ticket
Question: Frequently you suggest that retirees and those close to retirement spend some of their savings having fun. While that may be sound advice, the problem many people have is that they have been spending too much having "fun" during their working life.
Getting the right balance between saving and fun is the challenge
Interest rates on savings rise and fall over a person's working life, but an average net annual earning of 5 per cent is easily achievable. So one way of looking at the challenge is to remember that for every $20 spent on "fun", that will be $1 less income per year for the rest of the person's life.
Over a number of years, $20,000 wasted would result in $1000 less income in each retirement year. Your suggestion to have fun could give many working people the excuse to avoid saving for a fun-filled retirement.
Answer: You're right of course. It's just that so many commentators and financial people emphasise the importance of saving. And while some people certainly need a reminder to save, there are others who get the balance about right, and a third group who need a reminder to spend more on good times.
I expect most readers know perfectly well which category they fall into. And I think it's almost as sad that some people live unnecessarily frugally, and die with many thousands of dollars, as it is that others retire with too little to come and go on.
By the way, an average return of 5 per cent after fees and tax is perhaps a bit high, unless you invest in a share fund or similar.
Question: At the end of last year my son changed jobs. He is in KiwiSaver.
At the job interview he was informed the company did not make KiwiSaver contributions for employees. I checked the government's KiwiSaver website, establishing that none of the exemptions applied to his situation.
I suggested he wait a short period to see what developed. However, a number of months later no funds are going in from the company. Is this legal? If not, what can be done to force the company to make contributions?
He is very disappointed, and I think it creates a poor working relationship. He has also established other employees are in the same boat.
Answer: This is poor. At the start of KiwiSaver some employers didn't understand their obligations, but nearly ten years later I can't buy that.
Nor can employers really complain about the added cost these days. Economics tells us that pay rises since KiwiSaver began must have been lower than they would otherwise have been, to allow for employer contributions. Employers who aren't contributing benefit from paying those lower wages. They are freeloaders - at the expense of their employees.
So what should your son do? Inland Revenue says someone in his situation "should first determine whether their employer belongs to a different superannuation scheme, and therefore is an exempt employer." You've done that.
The Inland Revenue spokesman continues: "If they don't get a satisfactory response, they should get in touch with Inland Revenue as soon as possible by calling 0800 549 472.
"Inland Revenue will send a letter to the employer requesting they start making the required deductions/contributions. The letter does not stipulate where the query came from or that a complaint has been made."
If that doesn't fix the problem, "Inland Revenue will take action", he says.
There are KiwiSaver penalties for employers who:
- fail to provide KiwiSaver information to employees or to Inland Revenue.
- fail to make correct KiwiSaver deductions.
- fail to enrol a new employee eligible for automatic enrolment (unless they are an exempt employer)
- fail to make compulsory employer contributions.
The spokesman adds that, "The vast majority of employers meet their KiwiSaver obligations.
"Some employers need reminders to make deductions for their KiwiSaver employees. In most cases this is due to an oversight or misinformation, rather than a policy of not contributing."
That doesn't seem to apply to your son's employer, though. I urge him to contact Inland Revenue.
Question: Your response last week on whether to retain health insurance appeared to recognise only two outcomes - either going private (if you have health insurance) or going public (if you don't).
I have taken a different approach. I have had no medical insurance for decades, and have saved so much in premiums I can afford to go private for any conceivable need, at my cost and my discretion.
The value of the money saved and invested year on year - in the mortgage, or shares, or whatever - is substantial.
And there are other advantages. If my health remains good I can spend it on other things. If I need health treatment I can choose to pay for it and avoid any squabbles with insurance companies about what they approve, pre-existing conditions, or anything else in their fine print. Simply avoiding all of the paperwork has been a blessing!
Our public health system is not perfect, but I have seen plenty of examples of needs being well met, when health insurance would not have led to any better outcome.
Answer: You're doing what's called self-insuring. The difference between that and simply not being insured is partly financial - you set aside money for health expenses if needed - and partly psychological - you don't get annoyed about paying your own health expenses.
It's a reasonable approach if you're quite well off - and lucky. But what if, soon after you start self-insuring, you need to spend lots on health - especially if you haven't got much to come and go on.
Sure you can then use public health. But there can be long waits and other problems with that.
Question: Twenty-eight years ago my wife and I decided that health insurance was something we could carry ourselves. Being from good stock and in good health we decided to put the same amount of money into a savings account. Now after making no withdrawals the balance is over $100,000.
Last year when I needed a pacemaker I went to Auckland Hospital, so once again did not need to call on that fund.
While I would not contemplate carrying my own insurance for house, contents or car, I wonder what you think of carrying your own insurance for healthy people?
Answer: The big difference is that if your house burns down or your car is written off, the government doesn't step in. So if you're going to self-insure anything, health insurance is the one to choose.
Still, it's a bit of a gamble. There'll be people out there who took the gamble and lost. And they're less likely to write in about it.
Question: I am 74 and pay about $5000 yearly for health insurance. A year ago I thought I would cancel the insurance as I felt really fine - going to the gym and feeling no negative medical symptoms.
So I went for a heart check-up, reasoning that the health insurer would pay my consultation fee before I cancelled the policy.
A week later I had a quadruple by-pass, for which the health insurer paid $63,000!
PS Op was totally successful.
Answer: Thank goodness you went for the check-up - both financially and health-wise. Your letter is a good warning to others who think they're healthy because they feel healthy.
Good to hear the operation went well.
Question: Last week you talked about reducing health insurance coverage by focussing on surgical only and paying GP costs as you go.
We did this but reduced costs further by taking a much higher excess per claim - in our case $1000. While this is a lot the reduced premiums over a couple of years can offset this cost almost completely if you don't have any surgery.
As you say you are trying to avoid the massive one-off surgery costs of hip or knee replacement, where elective surgery in public hospitals is seriously limited.
So we keep the monthly costs as low as possible as we move through our 80s, but preserve the protection of health insurance for major surgery.
Answer: Last week I mentioned getting high excesses for car, house and contents insurance. It's a good idea to do that for health insurance too - especially if you don't expect to claim often.
Your point about hip and knee replacements is a good one. I know several insured people who were very relieved they didn't have to wait in a long queue for a government-funded operation, meanwhile losing mobility.
HOW HAVE YOU DONE IN KIWISAVER?
Tomorrow is the deadline to send me information on how your KiwiSaver account has performed. I've received many responses - thanks very much - from people in some types of funds. But I haven't heard much from people in the lowest and highest risk funds - called defensive and aggressive. Also there aren't many responses from non-employees in conservative funds. If you're in one of those groups, I would really appreciate hearing from you.
If you've never made any withdrawals from KiwiSaver, and you've made regular contributions throughout - or skipped just a month or two perhaps between jobs - please email me the following:
1. The year you joined KiwiSaver.
2. A close estimate of how much of your own money - not employer or government money - you've put in. See below for how to get this total.
3. Your current balance.
4. Whether you are (a) an employee or (b) self-employed or other non-employee.
5. The name of your provider.
6. Whether your fund is defensive, conservative, balanced, growth or aggressive. To find out, go to this page on the KiwiSaver Fund Finder, www.tinyurl.com/CheckFund. Do a search on your fund, and on the right side it tells you the fund type.
There are several ways to find out how much money you've put in. You could add up the info on your annual statements. Or phone or email your provider. A third way applies to employees. Go to www.kiwisaver.govt.nz, click on My KiwiSaver on the top right corner, and sign up if you're not already signed up. That will give your total pay deductions and any voluntary contributions you've made through Inland Revenue. It doesn't include any contributions made directly to your provider, so you'll need to add those.
Send your numbered info to firstname.lastname@example.org with "KiwiSaver performance" in the subject line. I'll summarise the results next week, to mark KiwiSaver's tenth anniversary.
WIN A SEMINAR TICKET
I'm presenting a seminar in Wellington, on Making the MO$T of Your Money, at 12 noon on Tuesday August 8. For details see www.maryholm.com.
This column is giving away five free tickets - worth $20 each. To enter, send an email to email@example.com with "Seminar ticket" in the subject line, and say in ten words or less why you would like to attend. The deadline is Monday July 10. Winners will be notified and announced in this column on July 15.
* Mary Holm is a freelance journalist, a director of the Financial Markets Authority and Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. Her website is www.maryholm.com. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's 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 firstname.lastname@example.org or Money Column, Private Bag 92198 Victoria St West, Auckland 1142. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.