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Home / Business / Companies / Aged care

Littlewood's lifetime of retirement planning

Tamsyn Parker
By Tamsyn Parker
Business Editor·NZ Herald·
1 Jul, 2015 12:10 AM7 mins to read

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Michael Littlewood has stepped down as co-director of Auckland University's Retirement Policy and Research Centre. Photo/Chris Loufte.

Michael Littlewood has stepped down as co-director of Auckland University's Retirement Policy and Research Centre. Photo/Chris Loufte.

Michael Littlewood reckons the key to being set up for retirement is owning your own home and paying off your debts.

Littlewood should know.

He has spent close to 40 years working in and around the retirement industry - the last nine of which have been studying pension policies from around the world at Auckland University's Retirement Policy and Research Centre.

Littlewood, who stepped down as co-director this week, set up the centre with economics professor Susan St John as part of his own retirement planning.

"I saw that as a way of stepping from full time work to full time retirement."

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But it has also been his passion.

Littlewood says the idea for setting up the centre stemmed from the need for a New Zealand-centric view on retirement policy and to let the world know what New Zealand was doing.

Despite having a unique approach to retirement provision with its generous universal pension, lack of tax incentives for retirement saving and low poverty levels in old age New Zealand barely got a mention in international research papers.

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Since then the retirement savings landscape in New Zealand has changed dramatically with the introduction of KiwiSaver in 2007 and its numerous tweaks.

Littlewood has never been a fan of KiwiSaver but accepts it's now here to stay.

The one major change he would make would be to drop all government funding of the scheme which last year cost the taxpayer around $700 million.

"If I had my hand on the till I would be getting rid of the member tax credit. Not getting rid of KiwiSaver."

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"There is a framework there but there is no real reason for the taxpayer to subsidise it."

The government is expected to bring in soft compulsion in the next year or so with an auto-enrolment process for all working over 18 year olds, although people will still be able to opt out if they want to.

Littlewood says there is little evidence to show that KiwiSaver is significantly increasing savings, a view backed up by a recent assessment report published by the Inland Revenue.

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• Govt considers automatic KiwiSaver enrolment

He says the government should focus on what it alone can do - providing a universal superannuation payment to ensure low levels of poverty in old age.

He also believes the tax playing field should be leveled and says the government has a role in collecting information about people's saving behaviour over time and to produce information to help educate people on their financial decisions.

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If I had my hand on the till I would be getting rid of the member tax credit. Not getting rid of KiwiSaver.

But beyond that he believes the government should leave it up to individuals to decide what kind of retirement they want just like individuals select what kind of home or car they want.

"Why shouldn't we trust people to make decisions in their own interests."

"There will always be those people who do not make sensible decisions. But to suggest that all people will make irrational decisions is irrational."

He also believes New Zealand will one day have to have the tough discussion about raising the age of entitlement to New Zealand Superannuation.

Littlewood says that may not be until after 2020 when John Key is no longer in the Prime Minister's chair but in the meanwhile information should be collected to enable a fully informed discussion to take place.

He says there is no crisis looming but the cost of NZ Super is going to increase to around 6.8 per cent of GDP in 2060 from its current level of 4.1 per cent.

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That is still low compared to the 2010 OECD average of 9.3 per cent.

"But we do have a big ticket item and what we should be asking ourselves is what do we think the reaction of taxpayers in 2060 will be?"

If the age is increased to 67 or 68 then people will need plenty of notice so they can take it into account from their 40s, he says.

If people still raise silly things I will speak up. It has been a part of me for so long.

Littlewood's move into being a superannuation specialist was more by accident than design.

A lawyer by training it wasn't until he moved to the UK during his OE in his late 20s that Littlewood got a taste for the industry.

"I had a house and a mortgage and a small child. It was on the eve of Christmas I was offered a job at an actuarial firm. I explained that I knew nothing about pensions but I was prepared to learn."

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Four years later he returned to New Zealand and sought out work in an actuarial firm again which was then bought out by the Wyatt Company.

Nationally it was a time of change with the government mooting to tax company pensions and employers choosing whether to keep providing it was a benefit for their staff.

He moved to Fletcher Challenge in 1988 as the employee benefits director and was given the task of helping to work through whether Fletcher's should be in the pension game.

"It was a very interesting challenge, deciding what the company should do."

Compulsion was superficially attractive but it didn't actually increase savings.

The tax changes for company super schemes were followed by Ruth Richardson's so-called mother of all Budgets in 1991 when it was announced that state-funded superannuation should be treated as a benefit like any other - making it income testable.

The out-cry prompted a government review and Littlewood was co-opted into serving on the taskforce.

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Heading into it Littlewood was a proponent of compulsory superannuation and tax breaks to encourage retirement savings and he's sure that was part of the reason the government appointed him to the taskforce.

But after reading all the research he did a 180 and now believes saving for your golden years should be voluntary and should not be given tax incentives because research has shown is does not equate to any increase in net worth.

"Compulsion was superficially attractive but it didn't actually increase savings."

In fact tax incentives were expensive and regressive favouring the well off over the poor.

"It was a kind of blinding flash."

His change of stance led to Littlewood overseeing a move to total remuneration at Fletcher Challenge and the development of a financial planning tool called Planit.

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When the firm broke-up he moved on and helped set up financial consulting firm Aventine which later became Superlife and then to the research centre, help set up with a grant from the Matthew Able Trust.

While Littlewood has stepped away from the co-director role he will still be editing his website Pension Reforms.

Littlewood says he has his father to thank for setting an example of an active retirement.

"He was a school inspector who had to retire at 60."

But he spent the next 10 years moving around the country and relieving as a headmaster.

"He was never happier and had the most money in his life."

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At 70 Littlewood is hoping the job change will allow him to spend more time with his family including his eight grand-children.

But he says it won't be the last people hear from him.

"If people still raise silly things I will speak up. It has been a part of me for so long."

Michael Littlewood
Qualifications: LLB and BA from Auckland University
Work history: Co-director of the retirement policy and research centre at Auckland University for the past nine years. Set up Aventine in 1997 and was a director there until 2008. Worked at Fletcher Challenge as the employee benefits director from 1988 - 1997. Watson Wyatt - senior consultant 1973 - 1988.
Family: Married with four children and eight grand-children.

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