As a financial journalist I sometimes hear people making mind-numbingly stupid comments about their personal finances.
One couple I know decided to withdraw their existing superannuation savings when the scheme closed and invest them in a Queensland apartment, they’d viewed while on holiday.
Queensland is the South Seas scam capital. I’d trust our government ahead of a Queensland real estate agent.
Instead my friends were going to throw their money at the same sort of investment that has seen Kiwis lose their life savings. Just ask any Blue Chip investor.
“You won’t catch me going into Kiwisaver,” my friend said. The underlying assumption was that Kiwisaver was bad, which the real estate agent had agreed with.
Here are some of the other idiotic excuses I’ve heard for not joining Kiwisaver:
I don’t trust the government: That’s natural for many people. But Kiwisaver money isn’t deposited with the government. Kiwisaver funds are run by private fund managers such as AMP, Tower and AXA.
I don’t trust fund managers: Just look at what happened to the finance companies. Fund managers aren’t like finance companies. They invest your money in shares and investments away from their own company, not lend it out to borrowers. What’s more, third party trustee companies keep an eye on the funds to help prevent bad practice. Of course nothing is guaranteed in life. But in the scheme of things investing in Kiwisaver is safer than a finance company debenture or even buying highly leveraged investment property.
The government might change it: Future governments might reduce or eliminate incentives or means test NZ Super. That’s no reason not to take the incentives now. Grab them while you can. Mary Holm, author of two books on Kiwisaver, says it would be politically unpalatable for any government not to make sure that savers are better off than non-savers, so you’re likely to be much better off if you have savings when you retire.
The fees are too high: By standards in the developed world fund manager fees are high in New Zealand and often kept secret . Having said that you’re still better off in Kiwisaver than other investments because of the government and in some cases employer contributions. Nowhere else do you get a 100% return on your money on day one as you do with the first $1024 you invest in Kiwisaver.
People who went into Kiwisaver have lost money: It’s a shame that Kiwisaver was launched not long before the financial crisis of recent years. Having said that, many funds have recovered the ground they lost in the credit crunch. What’s more, if you haven’t withdrawn money, you haven’t lost any real money.
I don’t want my money invested in the stock market: There are a number of counters to this. First of all, traditional superannuation schemes were invested in the stockmarket. That’s what made them grow. Secondly, you can choose cash and bond-based Kiwisaver funds if you don’t like shares.
I’d rather invest in bricks and mortar: Do both. It’s a real no brainer to have a range of investments. It’s fine to invest in property, but you still may as well take the government subsidies and employer contributions. Never look a gift horse in the mouth.
Finally Holm believes that people who don’t join Kiwisaver will regret their decision. You just need to ask Australians, some of who grumbled when compulsory super was launched there. More than a decade down the track the Aussies love their super funds