How to calculate the value of your pension
- September 24, 2021
New Zealanders will receive their pensions on June 30, 2018, but there is one more step to taking it.
As of April 2019, those with a defined contribution pension scheme will be able to put aside up to $17,500 ($27,000 for those over 65 and $19,500 for those under 65) to be used for a range of investments.
This year, the Government is offering a range to those with defined contributions who want to start putting away money to invest in stocks, real estate, technology and other asset classes.
However, the first set of plans are just the beginning of a process.
Auckland University finance professor Ben Collins, who’s a member of the New Zealand Pension Fund Advisory Council, said it’s important to look at how many people have chosen to put their money into a pension fund over the years.
“We’ve always looked at pension savings as a way to diversify, to reduce your tax liability and to protect your retirement.”
We’ve also been looking at pensions as a form of investment, so we’ve done that through an investment fund.
“For those who’ve opted to put away their pension, the best way to look is to look to the top 10% of Kiwis, which is about 80 per cent, and to say, ‘this is how much money you need to save for retirement’,” Collins said.
“And then look at the other 20 per cent.”
“That’s where it gets really interesting, if you look at where you are in the country.”
In Auckland, the average retirement age is 61, so you’re getting an average of $15,000 per year in savings over the course of 20 years.
“Collins said this is a much better savings rate than people might expect from a defined benefit pension, where the Government sets the benchmark age and puts in a contribution rate.
The rate at which your pension is paid is also set by the government, he said.
“But the NZ Pension Fund does encourage you to do that.” “
For people who are eligible for pension, it’s not going to happen,” Collins said, adding that it’s up to you to decide if you want to keep your savings as is or to start investing.
“But the NZ Pension Fund does encourage you to do that.”
Collins said the NZF would be looking at “a number of different options” for investment, from a stock fund to an asset class fund to a mutual fund.
“You could put your savings into real estate and real estate is a pretty good asset class.
So, the real estate portfolio is probably where you should be investing, if that’s your investment goal.”‘
I’ve invested before, I’m looking forward to the future’While it’s true that you can always invest at the same time, Collins said that you could also invest as you would a pension.
“If you’ve invested, that’s been successful.
You’ve probably invested in the stock market and you’ve done well.”
If you have an investment plan, you might have to invest now, but the best thing is to invest as if you have a pension.””
So, it will be a gradual investment,” he said, “but you could potentially invest and then invest and invest and reinvest and invest again.
“Collins also said that people who had been in a defined-benefit pension would have the option to convert to a defined contributions pension.”
New Zealanders can apply to convert their pension from a fixed to a variable benefit plan, but only if they’ve lived at least 20 years in New Zealand. “
So, if there are some other options, you could choose that one.”
New Zealanders can apply to convert their pension from a fixed to a variable benefit plan, but only if they’ve lived at least 20 years in New Zealand.
If you live in New England, it may be a good idea to convert your pension from the fixed to the variable, Collins explained, but it’s a different process.
“In New Zealand, you can convert your pensions to a fixed benefit plan and you can do that with the NZM fund.”
“There’s a lot of information out there about what’s a good variable benefit scheme,” Collins continued.
“The NZM is not a variable plan.
It’s a fixed plan.”
The NZF has some very good data, including a report from the Centre for Retirement Research, and that’s a very good thing, but for most people, it doesn’t give a lot to be concerned about.
“It doesn’t tell you what you should and shouldn’t do with your investment.”
Collins is not surprised that some people choose to invest after working for a few years and have seen their savings increase.
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People are moving into investing in the future, so they’re
