NZ Herald 18 October 2025

AWhile many would consider your plan quite radical, it’s nothing compared with the retired Australian couple in the media recently for booking 51 back-to-back cruises because that was cheaper than living in a retirement home.

I’m not sure whether they sold their home to fund the fun, but the basic idea is sort of like what you plan — although you might be happy with just a couple of cruises plus other travel!

It’s quite astonishing how most of us, especially as we get older, become attached to our homes. But clearly you two don’t feel that way. And in any case, you can make a home in the property you rent — as long as you can get a long-term lease, so you’re not turfed out when it least suits you.

There are more long leases around now, particularly in build-to-rent buildings. These properties “are typically owned by corporate investors and managed by specialist operators,” says the Property Council.

Tenants can stay as long as they like, and “maintenance issues or queries are dealt with promptly and professionally. No more nagging the landlord about that leaky tap.

“While every development is different, many allow you to choose to make the home your own — paint a wall, adopt a fur baby — the space is yours to personalise.”

The Property Council adds that rents in these buildings usually rise with inflation. But NZ Super generally rises faster than inflation, so that shouldn’t be a worry.

If you prefer to rent a house, I reckon many landlords would welcome you as tenants. I suggest you discuss your rights to decorate and so on, and how maintenance issues will be handled, before you sign up.

By the way, another way to get the use of some — but not all — of the money tied up in your home is to get a reverse mortgage or home reversion. See earlier columns, or equityrelease.co.nz.

AGood questions that I’m sure many are pondering now that some non-bank deposit takers — which tend to offer higher term deposit interest than banks — are covered by the Depositor Compensation Scheme. Why not go for higher interest if your investment is protected?

Under the scheme, if a participating bank, finance company, credit union or building society defaults, depositors will get their money back, up to $100,000 per person.

Can a finance company opt out? “Deposit takers licensed by the RBNZ are automatically covered under the DCS and pay levies towards the DCS fund,” says the Reserve Bank. “They do not have the option to remove coverage from protected products.”

But what if the finance company stops its deposit taking business?

A covered finance company “is required to satisfy certain prudential requirements on an ongoing basis.” That means it has to have “sufficient assets and money to carry out its activities, including repaying your protected deposit in accordance with the terms of your account,” says the Reserve Bank.

If it’s winding up its business, “the finance company should have sufficient funds to repay your protected deposit because of the RBNZ rules.” If the money is not there, you will be repaid from the DCS fund, which is managed by the RBNZ on behalf of the Crown.

So far so good. But all this might take a while. How long, I asked?

“We would need time to process data from the failed deposit taker to make sure all eligible depositors receive the correct amount they are entitled to, and to ensure compensation is paid into the correct account.

“We would work to process payments as quickly as possible, although complex arrangements may take longer. As our systems and processes mature, we expect these timeframes to decrease,” says the Reserve Bank. “We expect this to be a matter of weeks, not months, for most straightforward cases.”

Would you get interest due to you?

“If a deposit taker fails, and a liquidator is appointed, the liquidator will freeze all accounts with that deposit taker at a specific time. This means that a depositor will be paid out the amount of their term deposit, including accrued interest as at that point in time, up to $100,000.”

What if it then takes a while for you to actually get your money? Would you get interest to cover that extra time?

“The liquidator’s treatment of accrued interest post the quantification time is a decision for the liquidator to make, based upon the contractual arrangements and available funds to meet creditors’ claims.”

So where are we? Firstly, always make sure a deposit taker, and the particular product, is covered by the DCS. There’s a list here. That page includes a link to each deposit taker’s website where the covered deposits are listed.

Beyond that, there will always be some risk that the institution — even a bank — will fail. If it does, it seems you can be pretty confident you’ll get your money back, but it might take a while.

By the way, I expect the interest gap between banks and finance companies will narrow — it probably already has — now that the latter offer less risky investments.

AI would think the advice you received about the best risk level for you was probably very useful. This is probably the single most important issue for people in KiwiSaver, and for people in retirement.

Obviously, it would have been good if the adviser had also talked about your tax rate. But it’s not that big a deal. Since a change in policy starting in the 2021 tax year, being on the wrong tax rate should be corrected anyway.

“The amount of tax a person pays on their investment in a PIE (a portfolio investment entity, which includes almost all KiwiSaver or other funds) is based on their Prescribed Investor Rate (PIR),” says Inland Revenue.

“This rate is nominated by the investor and is based on their income for each of the last two tax years. For example an investor’s PIR for 2026 is based on their income from the 2024 and 2025 tax years. The three possible PIRs are 10.5%, 17.5%, and 28%.

“At the end of the tax year the PIE tells Inland Revenue the amount of PIE tax paid on behalf of that member and the PIR that was used to calculate the tax.”

Now here comes the good bit. “IR checks the investor’s income for the previous two tax years to determine if the investor had nominated the correct PIR. If the investor had chosen the wrong rate, they will be ‘squared up’ and an assessment made by IR of the correct PIE tax they should have paid, and this will be added in to their overall end of year tax assessment.

“If they had paid too little PIE tax, this will result in a tax bill to pay, or a reduced tax refund. If they had paid too much PIE tax this will result in a tax refund or a reduced tax bill.”

Also, “IR issues PIR notifications to members and investors when they believe the investor nominated an incorrect PIR for the previous year. These are issued from August each year and tell the PIE the correct PIR they should be using for the current year. The PIE must then use that rate, unless told to use a different rate by the investor.”

It seems, then, that you won’t have been paying too much tax — perhaps because your PIR rate is based on income in two earlier years. You might want to search on “Find your PIR” on ird.govt.nz to work out your rate. If you’re still certain you have overpaid, I suggest you take up the issue with Inland Revenue.

I also asked AMP for comment.

“Currently, PIR checks are not included in our routine adviser reviews. We rely on the IRD’s annual checks to ensure customers are on the correct tax rate,” says a spokesperson.

“Advisers do not typically provide tax advice without a full wealth and income profile from the customer. However, we agree that informing customers about checking their PIR can benefit them. We actively communicate this through our website, monthly newsletters, and annual statements.”

I asked whether they thought their advisers should point out the issue.

“We believe it would be beneficial to inform customers about checking their PIR during routine adviser reviews. We intend to update our processes to make sure this is included as part of an advice conversation with members, encouraging them to verify their PIR with the IRD.”

So there you go — your complaint has borne fruit!

AMP pointed out that other KiwiSaver providers are probably in much the same situation.

AYour wish is my command! And the short answer is “it depends.”

“Terry Baucher’s response is broadly correct,” says Inland Revenue, but it adds, “We would make a slight clarification. A person’s use of a holiday home they own is not counted for GST purposes.

“However, if the holiday home is owned by a close company or family trust, then the person’s use is counted for GST purposes, as they will be associated with the company or trust.

“In those circumstances, when a holiday home is used for short stay accommodation, the market value of any use of the holiday home by associates (such as family members) is counted towards the GST threshold, as is pointed out.”

In response to your comment about communication, “IR has produced a few different pieces of advice on the use of a holiday home by associates since 2019.”

One is the Curtis example at the bottom of this page. Another is paragraphs 79, 82, 85, and example 7 in this document.

As I said last week, this calls for a conversation with an accountant.