Your Quarterly E-Zine
Edition 11 • December 2019

This website contains the latest edition of Forsyth Barr Focus, a quarterly on-line magazine written by senior members of Forsyth Barr's investment team.

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Saving Kiwis

Operation Nest Egg is a well-known initiative that’s been launched to protect and grow the population of New Zealand’s most iconic bird, the Kiwi.

The basis of the programme is to remove Kiwi eggs into a predator free environment and then release the chicks back into the wild once they’ve been incubated, hatched and reared to a size where they can resist predators. If the programme is successful, over time the number of Kiwis living a safe, healthy, self-sufficient life will increase.

In some respects, the desired outcomes of Operation Nest Egg in creating the conditions for independent well-being, have an alignment with the Government’s goals when it comes to retirement savings. By all accounts Kiwisaver seems to be successful in terms of New Zealander’s participation rates. According to a recent Neilsen Survey*, in the Asia-Pacific region (including New Zealand) the proportion of people saving for their retirement exceeds the global average. (This is in sharp relief to Europe where 40 percent of those surveyed indicated they have no intentions to save for retirement at all.)

Such has been the success of Kiwisaver that there is now political talk of making the scheme compulsory, despite 80% of 18 to 64 year olds already being enrolled. Given that there will always be a proportion of the population which will opt-out of Kiwisaver owing to financial hardship, perhaps the focus should now move from the start line to the finish line of retirement savings?

At present, Kiwisavers received unfettered access to their accumulated funds once their relevant exit criteria have been met. For many, (perhaps most?), New Zealanders, the receipt of accumulated savings will be something of a financial windfall, with the savings process over a large number of years (for many savers) having been largely unobtrusive and automatic.

In the paper The Psychology of Windfall Gains^, it’s suggested that for windfall funds to last (i.e. to not be wasted) it’s necessary for a budget to be in place before windfall money is received. The paper notes that “until some reasonable target is decided upon … money remains uncommitted and therefore available for extravagant, frivolous, or speculative use.”

When it comes to financial speculation, the Government goes to some lengths to educate and protect Kiwis, with the New Zealand Lotteries Commission having written a comprehensive 58 page booklet for winners of lotteries.

The objective of the booklet (which states that “now it’s time to start thinking of how to get the most from your money and the opportunities it has presented”) is to provide “helpful guidelines to planning – social, financial and legal”. The Lotteries Commission’s advice to windfall winners is to prepare a sound financial plan, “to lay out what you want to do with your money in the short, medium and long term.”

When it comes to Kiwisaver, perhaps the focus on compulsion should now be directed to the windfall aspect of Kiwi savings becoming available to savers. The enforced discipline associated with foregoing consumption for years, will have little benefit if not matched with the voluntary discipline around how accumulated funds will be consumed in the future.

The thought arises that the methods of Operation Nest Egg in having a well thought out and executed plan to safeguard present investment for future benefit, is not only good for Kiwis, but also for Kiwisavers.

* This Is Not A Dream - Winners’ Information; New Zealand Lotteries Commission

^ The Psychology of Windfall Gains, Arkes, Joyner, Pezzo, Ohio University, 1994

By Gordon Noble-Campbell
Director, Private Client Services

This article was first published in April 2014