This article was published on 27 July 2019. Some information may be out of date.

QAs a 51-year-old male I have spent about 16 years on an invalid’s benefit supplemented by an independent living allowance. I typically would receive from WINZ $523 per week, and pay weekly rental of $360.

This year, I received approximately $50,000 from the estate of my parents. From this, about a month ago I bought a car for $14,000, which I feel I need. I have also bought a new fridge and television, and have $29,000 left.

Because of my inheritance WINZ have reduced my total weekly payments to $282 per week. As a result, I am currently using my inheritance just to survive week to week.

I have been honest with WINZ about the money I have received, but at this rate my inheritance will be gone within two years on living expenses, which WINZ had previously paid for. I don’t believe I’m being frivolous with this money and just want it to last longer than it is.

How can I protect the remainder of my inheritance to help with the extras in life, necessities I have previously struggled to pay for, such as dental bills, haircuts and clothing?

AMost people — including me — will sympathise with you.

But from a government perspective it’s tricky. They have to strike a balance between allowing you to benefit from an inheritance and avoiding spending taxpayer money on people who are better off than others in the community.

The main payments you were probably receiving before the inheritance are:

  • The supported living payment, which used to be the invalid’s benefit, at $274 a week.
  • The accommodation supplement, at $165 a week.
  • Temporary additional support, at $82 a week.

The second and third payments are asset tested, “and a person with $29,000 in the bank would lose the full amount of these payments,” says Kay Read of the Ministry of Social Development.

What about the supported living payment?

“A one-off capital payment from a will or an estate is not income for benefit purposes and would not directly reduce the benefit rate,” says Read.

In some cases, income you earn on that money, such as interest, could reduce your benefit. But only if it’s more than $100 a week, or $5200 a year — and there’s no way you’re earning that on $29,000.

So let’s look at your options:

  • Continue as you are. As a single person, once you’ve spent your inheritance down to $8100 your accommodation supplement will start again — as long as you still qualify. And once you’ve spent down to $1095, your temporary additional support will restart if you still qualify.
  • Spend all but $8100 of the $29,000 now, so your accommodation supplement restarts straight away. “If a person receives a capital payment and spends the full amount it cannot be considered a cash asset because the person hasn’t retained it,” says Read.

Of course you don’t want to blow the money on unnecessary things. But you could spend ahead on clothing and appliances that may need updating soon.

An alternative would seem to be giving the money to a trusted person, on the understanding that they would help you out with dental bills, haircuts and clothing in the future. But it doesn’t sound like a good idea.

“The purpose of the Social Security Act 2018 states that people should look to their own resources before seeking support from us,” says George van Ooyen, group general manager Client Service Delivery at the Ministry of Social Development.

“The way clients treat their assets before they come to us can affect what payments we later make to them. It can mean their payments stop. We work with each client so they understand the implications of decisions they make with their assets.

“We need to ensure the fairness and integrity of the social welfare system so that benefits are paid to those who need them.”

Really sorry I can’t be more helpful.

QI regularly read your column but have been spared having to think about KiwiSaver since it commenced after I turned 65. I am aware the rules changed on 1 July, so over 65s can now join.

I receive NZ Super, have a few shares and a bit in the bank — savings and term deposits. Is there anything in KiwiSaver that might be of interest to me?

AI admire your honesty. While others over 65 have complained bitterly about being excluded from KiwiSaver, the exclusion made your life easier. But now you have to take notice. Oh no!

As it happens, while there’s more work for you, I get a break. Another correspondent has already answered your question. Read on.

QI continue to gain value from my KiwiSaver well after turning 65. I am 71, and debt-free. My wife, not yet 65, has her own KiwiSaver. Until her KiwiSaver can contribute, my provider pays a fixed sum into our joint account each month.

KiwiSaver makes it simple. We get the security of a wide spread of investments, professional management, and a reliable long-term income stream.

My fund is exposed to investment risk because I want it to “work” for about 30 years until my wife reaches, say, 95.

If I had a more modest amount invested, I would reduce my risk exposure, but I am fortunate to have a substantial sum. I am poised to tolerate drops up to, say, 30 per cent to achieve a better long-term return. I didn’t flinch when fluctuations in share values caused my capital to drop about 10 per cent a few months ago (since regained).

I like being able to monitor my balance daily. If I worried about fluctuations, I should choose a lower risk fund.

P.S. Although my former employer operated a retirement scheme, I opened a KiwiSaver account as well. My employer already contributed to my existing fund, so was not obliged to contribute to KiwiSaver.

AThanks for a good summary of the merits of KiwiSaver for those in retirement. Diversification is a big one.

But you worry me a little.

On having your spending money coming out of a higher-risk fund, please see the second Q&A last week. That works well over time only if you have lots of savings and can cope with really big sharemarket falls — not just 30 per cent but 50 per cent or more.

Nor am I a big fan of monitoring investments daily. The frequent wobbles can be unnerving. But if you can take it all in your stride, good on you.

And I do applaud your joining KiwiSaver as well as your employer’s retirement scheme. As you realised, even without employer contributions, you still get the government contributions, which are worth having.

QWe have been reading your Herald column for years. And I am about to finish reading your book Rich Enough?, which is good. It is such a well rounded book that I can throw out most of the column clippings that I have been hoarding for so long.

Our circumstances: we are in our seventies, and retired. We have moved from the big city to a smaller town, sold two of our five rentals, and plan to sell one more. Some of the proceeds from the rentals are in a bank investment fund and the rest are in term deposits.

We have been in KiwiSaver from the beginning. Our accounts each have modest balances but have not had exceptional growth.

Our question: does it really make any substantial difference if we invest some of our cash reserves through KiwiSaver or go directly into indexed funds? It seems to us that the benefits of KiwiSaver have run out by this stage of our lives?

ANow we’re making a finer distinction — between KiwiSaver and non-KiwiSaver index funds.

Both will give you the same wide spread of investments that the previous correspondent enjoys, and in many cases regular withdrawals.

But there are a couple of arguments in favour of KiwiSaver:

  • While the scheme is not guaranteed by the government, the Financial Markets Authority keeps a tight watch on KiwiSaver funds — both the providers and the supervisors who watch over the providers — because so many New Zealanders are invested in them.
  • Generally, KiwiSaver fees are lower than for similar non-KiwiSaver funds. Lower fees make a big difference, and could be the deciding factor for you.
  • KiwiSaver providers may be better at communicating with investors than non-KiwiSaver providers, because of regulation and competition.

PS It’s good to know that my book is helping you tidy up!

QYour headline last week, “no refund too small for the taxman”, caught my attention immediately.

In 1998, my husband received a cheque from the IRD for 1 cent. Below the amount was written, “Please clear this cheque promptly”. We could not believe it! What a waste of money, including the time, cheque and postage costs, and all for 1 cent.

We had it framed, and it is now in our dining room, where it attracts a lot of attention, (and some good laughs).

ANaughty you, not clearing the cheque!

The waste of money in the case of the 11-year-old girl in last week’s column — who is owed a 4 cent tax refund — has also concerned others. So I asked Inland Revenue for comment.

“We’re legally required to send everyone who earns income an annual assessment, no matter how small or large any refund or bill is — but we do that by e-mail where we can,” said a spokeswoman.

“We only send refund letters where people haven’t opted to receive their notifications electronically. Customers can select to receive them electronically by going into myIR and changing their notification settings.”

She added, “Some people think that small balances should be written off, but there are others who think their tax should be squared up to the last cent as a matter of principle. And it is important that people know their year-end tax position for certainty reasons, even if it’s a small debit or credit.

“The law tries to strike a balance between those two perspectives.”

She then repeated a point made last week: “Refund balances of under a dollar carry over from one year to the next until they add up to a dollar or more — at which point we pay them into a nominated bank account.”

When you owe Inland Revenue, though, it’s a different story — and perhaps not in the way that many expect. “Tax bills of $50 or less are written off each year and don’t add up over time,” said the spokeswoman.

Isn’t that nice.

QI have to say I am bemused by the predicament your correspondent described regarding the 4 cents owing by IRD to his granddaughter.

Sometimes you just have to solve these problems with a little bit of gymnastics. My solution would be to pay the IRD another 96¢ and force them to refund a dollar!

Maybe it’s a case, this time, of having to bait the line with a mackerel to catch the sprat. Just think how much they will be saving the economy in postage and paper shuffling over the years.

AGood thinking — although it might better to just to have a laugh and then forget about the whole thing.

After all, it doesn’t sound as if there are usually many costs, as long as people choose to communicate by email. Inland Revenue obviously first has to do all the calculations on everyone before they find out who is an Under One Dollar Wonder.

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Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. 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 [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.