This article was published on 30 November 2019. Some information may be out of date.

Q&As

Plus

QSome time ago, you asked for suggestions to make Christmas less expensive.

Several years ago our family (ten adults and eight children) decided that Christmas didn’t need to be a huge commercial exercise.

Since then we have celebrated — with lots of laughs:

  • an op-shop Xmas
  • a “donate to charity” Xmas
  • a second-hand book Xmas
  • a “second-hand anything” Xmas
  • a “get rid of our unwanted stuff to another lucky family member” Xmas

Of course, some of the ideas overlap, but who cares? Some of the grandchildren do baking or make sweets, etc. There are unlimited possibilities to be creative.

We all agree it’s lots more fun, much less stress, and way less expensive.

AWhat great ideas. Lots of families now do the “everyone gives to just one other person” thing. But your themes sound like much more fun.

It’s nice to give birthday presents, when you’re buying for just one person at a time. But the Christmas spendfest — when “This will have to do for Fred” means many people receive stuff they don’t want, and families go into debt in the process — is crazy.

QWho is making a killing? In April 2016 my wife and I signed for an apartment to be built at the Auckland Trotting Club and shortly thereafter paid a 10 per cent deposit, which is over $130,000.

We were told the money would go into the club’s solicitor’s trust account and earn interest. I’ve since learnt the interest rate is 1 per cent.

The apartments are still not completed. The expected move-in date is now June 2020. So our deposit remains in the trust account.

In 2017 we sold our home and put the proceeds, in excess of $1.4 million, into a one-year term deposit at 3.5 per cent. So that’s what the going rate was then.

With over 240 apartments sold and deposits paid, the solicitor’s account would have in excess of $20 million in it. Obviously one would expect them to be earning the same interest as us, or more. Please note that these rates applied before Mr. Orr put his oar in and reduced rates just recently.

My question: who is creaming it, the club, or their solicitors or the solicitor’s bank?

AIt seems that either the solicitors or their bank are doing quite nicely thank you.

“We cannot comment on any particular private contract details,” says Mauro Barsi, the recently appointed CEO of Alexandra Park. “But we can make clear that stakeholder funds are placed in solicitor trust accounts, on-call, at floating rates, at receipt. These rates are then a matter for the relevant solicitors, can vary, and we believe are held for the benefit of both parties until the contract crystallises.”

Can the solicitors earn more interest than depositors receive?, I asked Barsi.

“Aside from proper tax treatment, as we understand it there is also a small law firm commission. This essentially acts as a firm’s fee for investing the funds on behalf of clients,” he says.

“We believe that such commission is charged by all law firms who invest funds on behalf of clients, though it may be calculated differently depending on the firm — for example if the purchaser’s lawyer had been holding their deposit in an on-call account or term deposit, then it would be the purchaser’s lawyer that would charge.”

So one of these two scenarios seems to be going on:

  • The account has at times earned, say, 3 per cent, but you’re earning only 1 per cent, and the law firm gets the difference. On large sums, that’s a lot of money.
  • The account has earned an unusually low return. If that’s the case, I asked Barsi, why was the law firm not seeking a higher return from the bank?

His reply: “Again, we cannot comment on any individual private contract, however we note that your correspondent can look to confirm what the rate is (or was) — and also potentially change rates or types of accounts with their lawyer.

“We suggest this as they should take advice from their lawyer on potential changes to rates, accounts and protections.

“With respect to usual legal accounts, we understand that their major benefit is that funds held are protected and secure during a transaction, though they do tend to have lower rates than term investments,” says Barsi.

The main trouble here is that your money has been held for an unusually long time. Normally, we all put up with low interest in these circumstances, because it’s just for a matter of months.

Time to get your lawyer involved.

QI was reading your last column about the correspondent with $32,000 in Bonus Bonds.

Back in 1971, when I was very small, my very proud uncle invested $5 in Bonus Bonds for me. This was a generous gift from his pay packet at the time. (The Reserve Banks’ inflation calculator suggests this would be about $74 today).

A couple of years ago I found the certificate and got around to checking the balance — sure that there would be some unknown windfall awaiting me. The balance after 48 years? $5! I might buy a coffee.

ABad luck! It just goes to show that for small amounts, you certainly can’t count on getting the average 0.75 per cent Bonus Bonds return. More on this topic next week.

By the way, good on you for using the Reserve Bank inflation calculator. It’s really useful for this type of calculation.

QI give to a number of charities by cheque — usually once a year, sometimes twice.

I have had a phone call from a medical charity. The caller “softened me up” by asking why I gave to them (my mother suffered from this medical condition). Then she urged me to consider making a monthly on-line donation.

I realise this means the charity knows what it is getting and when. However, I am in my mid-eighties and solo. My executor works overseas for at least half the year.

When one dies, superannuation payments stop, but regular on-line payments will continue until they are contacted or bank accounts closed — more work for the solicitor (and more expense) or my trustee. I intend to leave a list of the charities I support, but my trustee will have more urgent matters to attend to in the short term.

With cheque donations the monthly letters can be returned with “Deceased, return to sender on them”.

AThanks for making a good point.

QFor some time, we have been considering how to leave donations in our will that would not be a cost or pain to administer.

What I’ve come up with is another option: Give now what you plan to leave in your will.

I believe it benefits everyone:

  • The charity gets the bequest now, which is worth more in today’s dollars than sometime in the future.
  • The donor gets their tax rebate while they are still alive.
  • The donor knows their money is making a difference now.
  • If they want, the donor can keep donating annually as before.
  • It makes writing a will easier, and with less administration needed it should make it cheaper.

Win, win! I can’t really see a downside.

AThe only downside I can see is that, after you’ve given, you might need the money for something unexpected. But if you’ve got plenty of emergency money, that’s not a worry.

Here’s another idea for charitable giving, plus insurance that you won’t outlive your savings. Put some donations in your will, and then spend your retirement savings assuming you will die at 85 or 90. If you live past that age, change the will so that you become the charity!

Next week: two readers suggest how to make donating easier.

QThe ongoing debate about means testing pensions and negative press about the “boomers” frustrate me. It is encouraging that you continue to support our “pensions for all” approach.

Like many boomers I have done well financially, thanks to being taught about budgeting and saving by my parents. I was more than happy to help pay for my parents’ pensions in retirement. I was frustrated when they were still net savers in their 80s, but that says a lot about their views on providing for the family. Our inheritance was very helpful, but not life changing.

I have my Gold Card and view my pension as a partial tax refund, as I still pay much more tax than the pension I receive. So I am also helping pay for pensions and benefits for those of my generation who did not have the foresight and/or ability to save.

Paying for three lots of pensions and getting one back I do not view as unfair.

AAre you a lawyer by any chance? You argue like one!

Most people of any age on higher incomes pay more in taxes than they get back from the government. That’s the deal in civilised societies. So I’m not sure that, in itself, is an argument for giving wealthier retirees NZ Super. Still, I don’t begrudge you your pension.

On your parents continuing to save in their 80s, that’s not uncommon. It shows the power of a lifetime habit — which might be too powerful if the saver is depriving themselves in old age!

Meaningful Christmas Gifts

Many charities offer Christmas gift programmes. You buy items for people in need that are given on behalf of your family or friends. For example, you might donate money for school equipment in developing countries. You receive an acknowledgement to give to your relative or friend to show what they have “donated”.

Each year, this column runs a list of charities that take part in these programmes. I’ve asked each one to describe their programme in 20 words or less:

Caritas Aotearoa New Zealand: 0800 22 10 22. “Caritas Gifts of hope, life, peace and learning enable our life-changing work around the world and in Aotearoa New Zealand.”

Christian World Service: 0800 74 73 72. “Give a gift like bees or water, bringing joy and opportunity to a family that needs water, food and justice.”

Leprosy Mission New Zealand: 0800 862 873. “Bring God’s blessing and love to the life of someone affected by leprosy, including access to the Cure from $20.”

MEND NZ — Mobility Equipment for Needs of the Disabled: 021 060 9631. “Give African or Himalayan youth a limb to walk to school or hearing aid to hear for the first time.”

Oxfam New Zealand: 0800 600 700. “Choose a fun, meaningful Unwrapped gift card or shop Oxfam’s range of beautiful ethical goods from artisans around the world.”

Save the Children New Zealand: 0800 167 168. “Can’t find the right gift? Buy a jerry can of clean water and help keep children healthy this festive season.”

The Salvation Army: 0800 53 00 00. “Give a gift that tackles poverty and injustice in the Pacific and around the world.”

World Vision New Zealand: 0800 800 776. “From chickens to goats, clean water to emergency food and helping train a teacher — World Vision’s Smiles gifts change lives.”

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.