So you plan on hitting 65 in 20+ years and are hoping that you will receive the NZ Super payment from the New Zealand Tax Payer via the welfare system? As I have been educating my clients, this system needs a major overhaul and only now has the Minister announced that these changes are now on the table.
NZ KiwiSaver, introduced in 2007, has given Kiwis 10 years to start their retirement funding and for those of you that didn't get the memo, this was the first step in aged care funding reform. This same step was introduced into Australia in 1993, with a 3% employer mandatory payment, increased over the years by successive governments up to the current 11% employer mandatory payment. This has given the Australian government the ability to cap and reduce the people who qualify for an aged care welfare payment funded by tax payers.
The reasoning behind these major funding changes is that, as new generations change their habits, New Zealanders are having smaller families, doing so much later in life, and thus reducing the amount of new taxpayers to fund the ageing population's NZ super payments. We are starting work later in life, after an OE and a few years additional education, then bouncing from new job to the next - unlike our grandparents, who left school early and worked the same job for many years late into their life expectancy. With much longer life expectancy, due to medical advancements and immunisations, we live longer and work less.
In 1920, there were nine taxpayers for every pension payment. It is estimated, that in 2020 there will be 2.5 taxpayers for every pension payment. So the numbers, just don't work. Get your wealth plan in place and do not rely on a taxpayer funded retirement. There are many ways to increase your retirement assets, if you have the time to talk.