Who pays for your retirement

What if, at the end of a working life, having contributed to the KiwiSaver Scheme over many years and amassing, let's say $100,000+, you become incapacitated and have to go into permanent care? This scenario will probably happen to many people. It seems unfair we will have made the effort to save through our working lives only to have it frittered away to subsidise our care until all is gone and the residential care subsidy kicks in. Perhaps there is an underlying objective to the scheme? When are your savings not yours to do with as you wish?

This is the dilemma faced by everyone in this country who saves a dollar now for their needs in the future. Acquiring assets and savings enables us to lift ourselves out of a hand to mouth existence and away from reliance on social welfare.

WINZ administers all social welfare benefits including the residential care subsidy.

This subsidy pays for the long-term residential care of a qualifying person who is no longer able to live independently.

The Ministry of Health first assesses whether a person requires residential care and then WINZ reviews the person's assets and income to find out if they are eligible.

The eligibility criteria are set out in a Work and Income booklet dated December 2015.

A single person over 65 living alone may qualify for the subsidy if their combined total assets do not exceed $218,973.

Assets include property, car, boat or caravan, loans to others and savings - this will include KiwiSaver.

It does not include household furniture and personal belongings.

It becomes more complicated for someone with a partner living in the family home.

Your limit is $119,915 in assets and savings, with the family home and car not included (or $218,973 with home and car included). Refer to the WINZ booklet for other options and scenarios.

What about a family trust? Work and Income will want to know if you are a beneficiary, trustee or settlor of a trust.

Can you give your assets away to relatives? Under current rules you can gift up to $6000 within a 12-month period, in each of the five years before you apply.

You may think that many people will end up needing rest home care, but they are in fact the minority.

The trend is to keep people in their own homes for as long as possible, with outside help as required.

One advantage of KiwiSaver is that this is our money to spend as we wish at age 65.

If we believe we are going to end up gaga in a nursing home, we can blow our savings on cars and cruises first, and let the Government pick up the tab for our rest home care.

How many of us would do this? Once we have secured some financial independence through saving or accumulating assets, it is difficult to return to penury.

And is it morally distasteful to manoeuvre ourselves into a situation where we benefit financially from tax dollars that could be better spent elsewhere?

As you probably know, the Government is having to deal with the demographic bulge as the 'baby boomers' retire.

The public purse will be under increasing pressure to pay for our health needs.

Our KiwiSaver savings will help towards paying for our expenses as we get older, not just rest home care, but other costs such as hip and knee replacements, cataracts and varicose veins.

While KiwiSaver is primarily designed to top up our retirement income from NZ Super, it is also helping many Kiwis buy their first home and develop a savings habit.

Shelley Hanna is an authorised financial adviser (FSP12241). Her disclosure statement is available on request, free of charge, by calling (06) 870 3838, or see peak.net.nz. The information contained in this article is of a general nature and is not personalised.
Send your KiwiSaver questions to shelley.hanna@peak.net.nz.