Mary Holm: Teacher miffed at KiwiSaver halt

Ministry of Education says it's unable to change rule regarding over-65s on an individual basis. Photo / Viktor Cap

My story is an interesting one where I believe the KiwiSaver legislation is age discriminatory, unfair and somewhat petty.

I am a high-school teacher in full-time employment (and loving it more than ever). I recently noticed that my employer's KiwiSaver contribution had stopped some months ago — when I turned 65 — with no notification. It was not such a nice 65th birthday present in a profession desperate to retain experienced teachers.

I was greatly upset to find in my school staff room relief teachers, learner support teachers, sports coaches and laboratory technicians over 65 getting an employer KiwiSaver contribution of 3 per cent. Also a group of "mature" teachers in the State Sector Retirement Savings Scheme still get the 3 per cent after age 65.

I discovered those folks are paid directly by the school, and being a "good employer" the school doesn't stop the KiwiSaver contribution at 65.The Ministry of Education, on the other hand, which employs most teachers directly, does.

In my opinion this MoE action is unfair and uncaring. I'd be happy to show you all correspondence with the Prime Minister's office, the MoE office, etc.

I agree that this is no time to treat mature teachers poorly, given the teacher shortage. But I can see the other side of the argument, too.

First, though, thanks for the correspondence, which included this from the Ministry of Education: "It is the ministry's policy that once advice is received from the IRD confirming we no longer need to make compulsory KiwiSaver contributions, these contributions are ceased. We are unable to amend or change this rule on an individual basis."

An Inland Revenue spokesperson confirms the process. "When a KiwiSaver member approaches the time when they are permitted to withdraw from the scheme (the later of when they reach 65 or have been a member for five years)", three things happen:

• "When members are within two months of being able to withdraw from KiwiSaver, their scheme provider should advise Inland Revenue.
• "Once IR receives this message, it automatically sends a letter to the member's employer to explain that they are no longer required to make compulsory contributions from the relevant date.
• "If the member's employment continues, it is the employer's choice whether to continue making contributions after the member's date of eligibility to withdraw."

What usually happens for government employees? I asked the State Services Commission.

"There is no uniform policy across the public service," says a spokesperson. "The law does not prevent employers continuing to contribute to KiwiSaver after an employee turns 65; however, that is a matter for negotiation between individual employees and their agencies."

What about non-government employers? Neither the Employers and Manufacturers Association nor Business NZ could say what most employers do.

Nor could a KiwiSaver provider I asked. But he added: "My expectation was that most would not [continue to pay after 65], but my experience was that many do." This is mostly for equity reasons, he said, but perhaps partly because the IRD process doesn't always work as planned.

"If the IRD doesn't tell an employer about the age 65 or tells it late, then employers do not know. And also if late they may not want to argue with the employee."

Sounds as if it's all the luck of the draw. So what's fair?

Many self-employed and non-employees would say employees are lucky to get employer contributions for many years and shouldn't whinge when they stop.

What's more, everyone receives NZ Super from age 65. So perhaps you're getting enough from taxpayers without continuing contributions to your KiwiSaver.

On the other hand, we're not talking huge dollars. And it's tough in your situation, where your colleagues are still receiving employer contributions.

I wondered if you could join the State Sector Retirement Savings Scheme, which, as you say, continues employer contributions after age 65. But unfortunately that scheme was closed to new members from October 2008.

Perhaps you should take up the issue with your union.

Tricky options

I potentially receive great incentive payments monthly and annually over and above a healthy base salary. I've got a mortgage split between two- and three-year fixed terms as well as a $27,000 student loan.

Am I best to save my incentive payments to: pay down my mortgage when it's time to re-fix; pay off my student loan so I have more take-home pay and can therefore increase mortgage repayments; or invest in shares and ETFs (exchange-traded funds), which I'm quite comfortable doing myself?

Let's start with the basics. Your total wealth is your assets minus your debts. So you can boost your wealth by either reducing your debts or increasing your assets.

To get a bit more sophisticated, reducing a debt with 10 per cent interest is equal to adding an asset with a 10 per cent return.

If the debt interest rate is higher than the return on the asset, you're better off reducing the debt. If it's lower, you're better off buying the asset.

In your situation, paying off the interest-free student loan is not a good idea. But it's trickier to weigh up reducing a mortgage at, say, 5 per cent with investing in shares and ETFs, because we don't know what their return will be.

Chances are good that, over the long-term, those assets will earn more than 5 per cent on average. But there will be ups and downs that would lead some people to bail out when the markets fall — a great way to destroy wealth.

Because of that, I usually suggest putting most spare money into mortgage repayment, but some into shares and the like for diversification, and so you learn about the markets.

In your strong financial position, you might put more in shares and ETFs — just as long as you promise to hang in there through the bad times.

General listings

I'm writing regarding your appeal for real-estate agents to comment on exclusive versus general listings of properties for sale.

Ten years ago I was a salesperson for a large multi-office agency in Tauranga. I also owned my own agency for a couple of years.

You suggest people use general listings with multiple agents rather than exclusive listings, in the hope they receive better service with multiple salespeople working for them and competing to sell the property faster and for a higher price.

In my experience the exact opposite is the case. Most salespeople will only take on general listings as a last resort and then not work the listing or show the property.

Why? The agency I worked with did not promote general listings. It did not receive any advertising in the printed media or online.

However, the main reason was that for exclusive listings the commission split was approximately 50 per cent for the company and 50 per cent split between the listing agent and the selling agent.

The exclusive agency was usually for 90 days, so the property had a good chance of being sold in that time and the agent receiving a commission for their work.

When a general listing sold, the agency kept a much larger percentage and the listing and selling agents split just a small portion.

So, what is the motivation for a salesperson to try to sell a general listing over an exclusive listing? First, they get no marketing. Second, there is a chance that another agent may sell it first, so what's the point in working hard to secure a buyer? Third, when it does sell, the commission is much lower.

Hence very few general listings were sold successfully. I personally didn't take on any general listings, and few experienced or "good" salespeople would either. This left only the poor or inexperienced salespeople.

I'm not 100 per cent sure that this is still the case. I do know real-estate agents get a bad rap, but it's hard work and long hours during the week, evenings and weekend.

Thanks for an enlightening letter. The system certainly seems to be set up against sellers who use more than one agent.

It's hard to understand, for instance, why the agency should keep much more of the commission?

Agent commissions

Could I add to your plea to agents to also explain why their commission percentages have not gone down ever, whereas property inflation has outstripped the cost of living?

According to the Reserve Bank's inflation calculator, from early 2000 to the third quarter of 2017:

• CPI inflation meant that what cost $100 then costs $146 now — an annual growth rate of 2.2 per cent.
• A $100 wage then would be $171 now — an annual growth rate of 3.1 per cent.
• According to PropertyIQ's House Price Index, housing that cost $100 then costs $341 now — an annual growth rate of 7.3 per cent.

So the average agent's income has way outgrown most other incomes.

However, that assumes commissions have not, in fact, been reduced. Agents?

Moving not simple

This is a letter from the pensioner couple who wrote about "doing it tough" two weeks ago, in response to last week's suggestion for them:

Move to Kawerau? It's not that simple.

We need to sell — take off real-estate commission, lawyers' fees (at both ends) and mortgage, and we have how much left?

Last week's correspondent said, "The couple could move here and buy a decent house for $200,000 or less, which would allow them to get rid of the mortgage and give them upwards of $75,000 in the bank."

Let's say we can find a place that doesn't need any work at all, because that would eat it straight away.

And there are still the moving costs.

Then power would cost more, rates are higher (I checked), New World? No Pak'nSave though. Besides I don't shop at supermarkets for fruit, veges or meat. I go to the local halal butcher. I grow most veges and fruit. In Auckland, we can do that year round. I have lived in a small town elsewhere, and the growing season is a lot shorter.

Actually that is why we now have a mortgage again, we moved back. We couldn't get a doctor, and had to pay non-patient fees of $65 each time. Travelling to anywhere is just not something we want to do now. Then there are medical reasons, diabetic clinic, proximity to hospital?

We have done work here on our place. We're too old to start over, even with the gardens, after having put in fruit, vege and herb gardens here and cleared the mess it was.
Don't think we haven't done the sums properly, with accurate figures and spreadsheets, even the cost of living expenses. We do it all the time, checking various places around the country.

Meanwhile, my husband isn't in good condition, and that sure doesn't help. It's getting to where he may not handle it at all, in a medical way.

You raise several fair points — most important, perhaps, that you have made your current house your home, and that you're not up for all the hassles of moving.

One message for others contemplating moving out of Auckland in retirement might be to do it soon after they stop work.

Thanks for writing again. It's food for thought for others. I hope things go well for you.

- 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 mary@maryholm.com 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.