This article was published on 28 April 2012. Some information may be out of date.


  • Reasonable and unreasonable expectations about NZ Super and people’s retirement savings
  • People need to think beyond their own needs, says reader
  • Better or worse then or now? Just different
  • Just how high are — and were — tertiary fees?
  • Oops! I got it wrong about foreign exchange and interest rates

QMany of your (usually older) writers often say comments such as, “I earned my superannuation by paying taxes all my life”. It seems there is a sense of entitlement that because someone has paid tax, superannuation is taken for granted.

I’m 40, and have been in the workforce for 23 years. I can clearly remember, even when I was just starting work, that the message was, “Save for your own retirement because there is no guarantee the government will always continue to pay super”.

So why do so many people still think this is a “right”‘, in return for just paying taxes? It certainly hasn’t been promoted that way for the last 20 years at least. Was it seen differently before then?

While I don’t begrudge people receiving taxpayer-funded super, I do begrudge people who haven’t saved a cent for their own retirement over their entire lives, but then still criticise that they cannot live well on NZ Super.

I have been saving for my retirement since I started working, which at times has meant forgoing things, including money for a larger house deposit. But at least I know that, regardless of how much the government super is when I retire, I am not 100 per cent relying on that.

AI don’t see much point in asking what the government said to people more than 20 years ago. How can a government make promises to be kept by future politicians with different policies?

People can probably count on future governments not to do anything terrible. We do live in a democracy. But there are different definitions of “terrible”.

Anyone who thought about it should have realized that, and — ideally at least — saved for retirement as you did.

There’s another point here, too. NZ Super is unusual in that it pays the same to everyone, including people who never paid a cent — or a penny — in tax, perhaps because they spent their whole adult life as a full-time wife and mother. It doesn’t make sense, therefore, to say NZ Super is a reward for paying taxes over the years.

However, I hesitate to be judgmental about people who haven’t saved for their retirement. Some years back, I interviewed three families with several children who were on the median income and struggling financially.

Later in life they probably had it easier. But they were halfway up the income scale. Those on lower incomes might never get beyond paying off their mortgage — if they even own a home.

Having said that, some people quite remarkably save a few dollars a week while earning a pittance. I don’t know….

QPeople need to start taking their social responsibilities seriously. Tax is not a burden, it is a cost of living in a civilized society.

I happily pay my tax, student loan and have been in KiwiSaver since it began, contributing 6 per cent in the hopes that one day I will not have to rely on others to fund my retirement.

So many people seem to have such a narrow view and consider only how it will affect them. I would ask them to take a step back and consider what is best for this country. Hence my point in an earlier letter to you about retirees who don’t need it refusing NZ Super.

AAlternatively, they could take NZ Super and give it to their favourite charity — redirecting government money to where they want it spent. Or how about they use it to support a younger person — preferably not a relative but someone in real financial need — to go to university? Then that student wouldn’t need a student loan.

If this became widespread, maybe we could put an end to student borrowing, and therefore an end to repayment problems, and an end to this whole “slack young people vs greedy old people” debate.

No harm in dreaming.

QI enjoyed your balanced approach to the old versus young argument in last week’s column. I am 40 so I am stuck in between these two bickering groups, and it appears to me that their situations are different rather than one generation being more fortunate than the other.

My Mum’s generation had the following characteristics that, while normal at the time, made it possible to achieve the things that today’s youth consider out of reach:

  • They got married, had a family and bought a home at a relatively young age — forcing fiscal responsibility at a young age and maximising time for capital gain in their properties.
  • Many people bought their first homes in “average” areas and often without much furniture.
  • Grandparents tended to live with the kids rather than in retirement homes. This assisted with child care and income (particularly in the case of Maori families).
  • Overseas travel opportunities were limited, so along with low unemployment there were few periods of income disruption.

However, I do have a gripe that doctors and lawyers received a free education then charged eye watering fees.

So, instead of having a better time than today’s youth, Mum’s generation had it — well, just different.

FYI — I am a Maori who grew up in very difficult circumstances in a working class solo parent family. I have worked since I was 11 to help Mum put food on the table, paid my own way through university and now have a beautiful family, a home in a nice suburb, a holiday home and another two rental properties in Auckland. So anybody can succeed, regardless of when they were born.

AYou are so right about expectations changing.

I’ve complained before, in this column, about young people turning up their noses at modest first homes in less-than-desirable suburbs. And I’ve pointed out that if someone wants to save, international travel is not essential.

On the other hand, house prices are much higher, relative to incomes, than when I was young. Plenty of young people are saving hard, skipping the travel and luxuries, and still find it difficult to get onto the housing ladder.

I like your conclusion. The deal is different for each generation.

QMany of your readers seem to be under the illusion that high university fees are the international norm. They are not. This is because we keep comparing ourselves to very high-fee countries like the USA, Australia and the UK.

However, OECD data show that in Europe university fees are much lower than in New Zealand, while wage rates are much higher. Many EU countries have low or no fees, and often government subsidies to encourage people to graduate with little or no debt.

The result is that young qualified people stay at home. In our brilliance we do the opposite.

New Zealand has a system of high university fees, plus student loans, which drive thousands of debt-ridden graduates and “non-completers” overseas. Who initiated this system, and who extended it?

It is deceptive to talk about average international fee levels, as astronomically high fee countries like the USA drag up that level, and make New Zealand seem not so expensive.

AAs a reader said in this column recently, “aren’t the cross-country comparisons you used last week at least as complex as the cross-generation comparisons?” Opinions differ widely on who New Zealand should compare itself with, and how — often depending on what conclusion the person wants to draw.

My research suggests that while you’re right about tertiary fees, the income situation is not so clear. Looking at total income on the fascinating OECD Better Life Index, New Zealand ranked 11th. While Luxembourg, Switzerland, Sweden, Norway, the Netherlands and Denmark are ahead of us, Austria, Finland, Belgium, Germany, France, Iceland, Italy, Spain and other European countries are behind us.

Still, it’s interesting to consider making tertiary education free. The counter argument is that it’s not fair for other taxpayers to pay the full cost of educating people to a high level, given that the vast majority end up earning more because of that education. Note the comment above about doctors and lawyers.

While we’re on the topic, another reader has chided me for saying there used to be “virtually no fees” for university. So what did we pay in the 1960s and 70s?

According to Hansard, Phil Goff said in Parliament in July 1989, “In the mid-1960s the level of fees for university students who did not get a fees rebate was, from memory, about $1,290 in 1989 dollar terms. By the start of the 1970s those fees, in 1989 dollar terms, were still more than $1,000.”

The Reserve Bank’s nifty CPI inflation calculator on shows that $1290 in 1989 was worth 60 pounds ($120) in 1965 — a reflection of the fact that inflation averaged more than 10 per cent a year in the 70s and 80s — extraordinary!

In current dollars, it equals $2180 — far from virtually nothing. The question, though, is how many people got the fees rebate? I think it must have been most of us. Does anyone have definitive information on this — as opposed to just memories?

QLast week you said: “…deposit rates are higher here than in the U.S. In theory, that suggests our dollar will fall against the U.S. dollar.”

Surely the opposite is true. Our higher deposit rates will attract US money to NZ and make our dollar rise. Isn’t that one of the reasons the Reserve Bank is reluctant to raise our OCR unless it absolutely has to?

ANot sure about the Reserve Bank’s thinking. They declined to comment.

But on your main point, it seems that you’re closer to correct than I am.

Years ago, I was taught that if interest rates are higher in Country A than Country B, that implies there’s a risk A’s currency will fall against B’s. The only way A can borrow from B is to offer high enough interest to compensate lenders for the exchange rate risk they are taking.

While that might sometimes be the case, an expert tells me that — if anything — currency traders currently expect the kiwi dollar to rise not fall.

So what’s going on?

Our interest rates have to be relatively high to attract the attention of overseas lenders, who often don’t know much about New Zealand. That makes sense. If you or I were looking at investment options and they included a provider we didn’t know much about, we would probably just give that provider a miss — unless it offered much better returns.

So is your comment correct, that our higher deposit rates will make our dollar rise? They may indeed put upward pressure on the kiwi dollar, I’m told. But other things have more effect, such as our currently strong commodity prices and low savings rate.

As I said last week, “So many factors feed into exchange rates.” At least I got that bit right! Sorry if my other comment misled anyone.

No paywalls or ads — just generous people like you. All Kiwis deserve accurate, unbiased financial guidance. So let’s keep it free. Can you help? Every bit makes a difference.

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.