Mary Holm

Mary Holm is a personal finance columnist for the NZ Herald.

Mary Holm: Take care judging those on welfare

34 comments
Pinocchio became a real person after he proved himself to be truthful and unselfish. Photo / Supplied
Pinocchio became a real person after he proved himself to be truthful and unselfish. Photo / Supplied

Sweeping statements can demean all people who may not pay tax.

"Tax is not a burden, it is a cost of living in a civilised society." Wrong Ms Socialist/Communist Mary, as our hard earnings went to non-contributors (doles, Housing NZ stayers), which was misused by left-wing politicians for their votes.

The New Zealand system is hard for middle-class professionals. We raised two children to have a good education and life, but Polynesian and Maori women gave too many births to get handouts from our dollars.

When we were away from home for work to be able to pay for their doles from tax, they and their children break our house.

Pardon me for asking, but have you got a long nose? If so, I assume you are a liar, just like Pinocchio.

Unfair? Well how about you?

The word "prejudice" comes from the Latin praejudicium, which means previous judgment, according to Merriam-Webster. Prejudiced people pre-judge others, assuming that because they are a certain race, gender, or have a long nose, they must have certain characteristics.

You've not only pre-judged Polynesian and Maori women and their children, you've also pre-judged my politics. My lefty friends will be startled to see their University of Chicago-educated mate labelled socialist/communist - even more so when they see that you're judging me by something a reader said last week, not me!

But what you think of my politics doesn't matter. Your other thinking does.

As Atticus Finch said in To Kill A Mockingbird, "You never really understand a person until you consider things from his point of view - until you climb into his skin and walk around in it." Or if you prefer Elvis, "Walk a mile in my shoes".

Pension debate

A friend scoffed when I said NZ Superannuation was "generous". I was referring to how it kept pensioners with little savings above the poverty line, and I knew it scored top marks among OECD countries for this.

My friend's view was that since it cost the State only 4.5 per cent of GDP, against an OECD average of 7 per cent, it was pretty mean. He reckons when the Boomers are in full receipt of it, at 8 per cent it will still be manageable on the tax base. He does want the pension age to move to 67 and then keep step with longevity change.

We are both pensioner economists and agree that our scheme is cheap to administer and we like the fairness of it - everyone gets it regardless of work history. But we also agree it needs to change with the times, like everything else. Working lives, longevity and social conditions are so different from when the current scheme was embedded over 35 years ago.

For us, current public debates about the Australian scheme and KiwiSaver and Baby Boomers are shallow, as they are not informed by analysis and evaluations of costs and benefits of alternatives.

Just as we set up the ACC after the Woodhouse Commission, let's use the same process to examine superannuation options. And not just superannuation - pensioners are taking the lions' share of the exploding health budget and this should be factored in. We need to adopt a "pension system", not one scheme, which can flexibly serve the next 100 years.

I recommend Andrew Coleman's clear exposition of pension options that outlines the issues to consider, at www.tinyurl.com/colemanpensions

Meantime, I want my bank to call the fortnightly amount I receive "NZ Superannuation". The statement says "Welfare". Our pension is not welfare. It is universal, paid for by (almost) everybody, for everybody.

What do you know - two economists who actually agree on something!

I like the idea of Woodhouse II, on superannuation. Now there's a retirement project for you two.

Let IRD sort it out

Re your recent column on a KiwiSaver fund not liking to receive a lump sum, the easiest approach is to pay the $1043 directly to IRD. They have a special tax code for this. I do it every year.

In fact, it's even easier because my bank's internet banking system allows me to pay tax, select the type of tax (that is, KiwiSaver) and it's done. Let the IRD sort out the payment to the fund.

For people who are not already set up to contribute directly to their KiwiSaver provider, this probably is a good idea.

I did have a couple of concerns at first. The first was that Inland Revenue might not necessarily know who a self-employed or non-employee's KiwiSaver provider was. But a spokesperson there has reassured me. "When a person enrols directly with a provider a registration is forwarded from the provider to Inland Revenue, and a link is set up between the member and the provider in our systems. Inland Revenue is then able to pass any government contributions or payments received on to the correct provider," she says.

My second concern was that it might take some time for the money to make it into a KiwiSaver account. This might matter if you were close to the June 30 tax credit cut-off date. But I was reassured again. "A payment is processed to the provider at the date it is received by Inland Revenue," says the spokesperson. "If a payment is received on June 30 it will process to the provider with an effective date of June 30." I would still allow a few days, though.

Banks that accept payments to Inland Revenue include: ANZ, ASB, BankDirect, BNZ, Kiwibank, National Bank, TSB Bank and Westpac. The account type to use for voluntary KiwiSaver payments is KSS.

Transfer to wipe loan

As KiwiSaver funds continue to rise, many people with student loans will find their KiwiSaver fund is at parity and then exceeds their student loan.

I think the Government should allow a simple one-time transfer from your KiwiSaver account to IRD once you do reach parity to wipe your student loan in one fell swoop!

Whether it is a sound financial decision remains debatable but many, including me, would jump at the chance to clear their student loans for reasons, inter alia:

• It clears that debt and wipes it as a stress/concern from your life.

• Retirement for many recent graduates is still 30 to 40 years away, making repayment of the student loan a more pressing issue.

• Take-home pay will substantially increase once you've removed the need to make compulsory student loan repayments from your wages.

It would also boost the Government's coffers. And it would cut down on admin. What do you reckon?

First, the negatives. We don't need more changes to KiwiSaver. Also, repaying a student loan from KiwiSaver would not be financially optimal. As long as the loan is interest-free, you are better off in the long haul repaying it slowly, and meanwhile earning returns in KiwiSaver.

However, you make some good psychological counter-arguments that are arguably just as important. And your idea would certainly help the Government's Budget.

Repaying student loans

I have been reading with interest the parents that are repaying their children's student loans.

I understand the necessity of the student loan system, to provide education to those who can't afford it.

However, it seems it is becoming common practice for people who can afford it to borrow the money interest-free, and then receive an early repayment discount - for paying back money they didn't need to borrow in the first place. Time to bring back interest-bearing student loans, attach a cost to it, to bring back some efficiency.

I'm with you. Charging interest would also help graduates better understand debt.

But the change would have to be gradual and the interest rate low. And no interest should be charged during full-time study.

To keep things fair, perhaps the Government could use the interest earned to reduce tertiary fees, so the loans would be smaller.

This week the Government announced some minor changes, including raising compulsory student loan repayments from 10 per cent to 12 per cent of income over $19,084. Here's hoping for bolder steps in future.

Tertiary fees of 50s

You asked about past tertiary fees. I started at the University of Auckland in 1959. The basis of fees on UE Bursary were: first year, half fees paid under the bursary; second and third years, full fees paid for all "new" courses. Failed courses, the student paid full fees.

I was a part-time accountancy student who commenced on 5 guineas a week ($10.50). The fees were quite high relative to the salaries earned. An extensive Google search has failed to produce any firm details of the amounts, which varied between faculties.

I basically paid my own way through university. My widowed mother paid my first year half fees and I was then "on my own". I paid board from day one.

Sounds as if fees in the late-1950s and early-1960s were pretty well taken care of - as long as you kept passing.

Fifth year fee bonus

In 1970 I enrolled at Canterbury University for a BA. The fees for that year were a bit over $90 - I paid a bit over $9. The rebate was because I had completed Higher School Leaving Certificate in my 6A year (that would be year 13 now).

It was a huge incentive to stay on for the fifth year of high school, and complete the Bursary exams, even though University Entrance was gained in the 6th form. Nearly all students expecting to go to university did that fifth year.

Your $9 then is equivalent to $122 now. Cheap.

And from the 80s...

For some unknown reason I still have a piece of paper dating back to when my son started university in 1988. This shows: University fees (Massey) $288; Students Association $ 99; Health Service $16.50, which totals $403.50, less fees grant (75 per cent) $216. So the total was $187.50.

Underneath is written: Study Grant $41 for 37 weeks; Accommodation $37.50; A Bursary $200.

So main costs were covered that year. On top of that would have been things like textbooks and stationery, entertainment, etc, and also travel with living in a non-university town. Also at that time vacation work was easy to obtain and of course males could earn more.

Okay, that's got us covered for three periods. Thanks for the letters. I think we can conclude that tertiary fees weren't a great burden for most students for quite a few decades.

- NZ Herald

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