Magazine article New Zealand Management

Saving Grace: Investing for the Future: Ten Years from Now, Will You Be Set Up for Life? Vikki Bland Takes a Look at the New Zealand Investment Scene in 2007. Is There Investment Potential beyond Property?

Magazine article New Zealand Management

Saving Grace: Investing for the Future: Ten Years from Now, Will You Be Set Up for Life? Vikki Bland Takes a Look at the New Zealand Investment Scene in 2007. Is There Investment Potential beyond Property?

Article excerpt

Even the most comfortably paid manager could feel a little unnerved after a visit to the Retirement Commission website. While most people want a retirement income that finances fun and opportunity as well as the essentials, fewer take the time to sit down and work out exactly how much money they need to deliver it.

According to the Commission's online calculators, a person wanting to retire in 15 years on 70 percent of $120,000 will need to have capital of around $600,000. From a zero savings position, that translates to savings and/or return on investments totalling around $2700 per month or $32,400 per year for the next 15 years.

For some senior managers and executives, such savings goals are within reach and may even be underway. But how many of us have saving and investment firmly within our sights? Are we instead the big spenders and rotten savers some economic commentators say we are?

At first glance, our financial prowess as a nation does appear weak. An April 2007 OECD economic survey of New Zealand describes the country as having a "large external deficit, very low household savings and a still-strong inflation pattern".

The survey also reports that while Australia has a household saving rate of 0.1 percent, the United States 1.7 percent, and Japan 6.8 percent, New Zealand's is a dismal minus 6.9 percent with household debt accounting for, gulp, 160 percent of disposable income. However, while statistically New Zealanders spend $1.15 for every dollar they earn, this doesn't necessarily mean the entire $1.15 has been spent in areas that don't deliver a return, says retirement commissioner Diana Crossan.

"Household debt has definitely gone up, but so has the value of assets so people think they can borrow more. We don't talk about saving any more, we talk about financial preparation for retirement," says Crossan.

She says young people may be better off spending savings on furthering their education to ensure they slot into a higher income bracket in the middle years. Similarly, it may be wiser for 'middle-lifers' to pay off the mortgage before beginning to save. Other people find it important to financially help their children to buy a house or start a business by providing 'early inheritances', family loans, or even 'passing on' a family home or farm.

"People with farms may not be savers, but they may be extremely financially well prepared for retirement. Others want to live their lifestyle now and are not saving when they should be; some are saving too much so that the life they are living now is not [enjoyable]," says Crossan.

What constitutes savings or investment is therefore not always obvious. Nor are the long-term effects of such 'hidden investments' on the economy.

FINANCIAL SAVVY Mark Weldon, CEO for NZX, is also hesitant to brand New Zealanders 'poor savers'. He says wealth and investment is measured in different ways and New Zealanders can generally be relied upon to think for themselves and obtain good advice.

"There seems to be a whole lot of debate around whether New Zealand has a savings problem. But that question, if it ever was a question, has been hijacked by people like [author and consultant] Michael Little-wood who rave on and on about our poor savings record," says Weldon.

Weldon says more New Zealanders are selling small businesses for significant gain and are not missing share market opportunities either.

"The first quarter of 2007 showed $90 million net fund inflow into the managed fund industry--that's the most for a very long period of time," he says.

Tim Jenkins, head of Mercer New Zealand, says business executives tend to think more widely about retirement savings than people at other levels of employment, are more likely to have an investment property and share portfolio, and to have achieved financial literacy.

That, by the way, is something the Government would like every New Zealander to have--from 2009, it plans to introduce financial literacy learning to schools. …

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