KiwiSaver nest-eggs lost for lack of insurance coverage

Rob Stock has a good article in explaining that hardship is often caused by disability - these are the essential facts:

"In the 12 months to the end of March, $81 million was paid out of KiwiSaver in cases of financial hardship, with 13,790 people drawing out an average of $5786 to help pay the bills."

Therefore KiwiSaver next-eggs are sometimes lost because they are used up early during a period of disability. This is an important issue which was sidelined from the design of KiwiSaver by politicians who legislated to keep basic levels of insurance out of the superannuation scheme. Well worth a read, and inclusion in client newsletters. 

Another financial planning issue was also identified - and it presages a large increase in people working until they are seventy years old: 

Two years' ago BNZ forecast that based on current payment trajectories, a third of people with mortgages wouldn't have paid them off by age 65.

...or they use KiwiSaver to pay of the balance. 

KiwiSaver: The Inevitable Comparison With Australia

Hat tip to Rob Dowler for referring me to this article. The article starts by simply comparing average account balances in KiwiSaver vs average balances in the Australian compulsory retirement savings scheme, noting nine times more in the Australian scheme balances. However, comparing wealth, not just superannuation balances, at retirement produced some interesting numbers. Yes, NZ males were still behind their AU counterparts, but NZ women were actually ahead of Australian women. The article doesn’t have enough information to help one understand exactly what is being compared, but I still thought the numbers were interesting, including noting that Australian people need more because their state pension is means tested.


Recent Insurance News

Here is the story of one family's story about how private medical insurance was essential in diagnosing and treating colon cancer. 'Private medical insurance is the only reason my husband is still here, as at 36 years old he was too young to qualify for public screening programs.' Click here to read more.

This story about a denied claim looks to feature questions of insurable interest. Link

Here is an interesting article by Andy Symons titled 'What if financial services had ingredients on the product’s packet?' 'Whether it’s for ethical reasons, an allergy or to stay true to a diet, checking the ingredients label when out shopping at the supermarket is now as common as having a bank account. But what if banks were required to put the ingredients on the labels of their products and services?' Okay, that's not strictly about insurance, but it is topical. Are you okay with your KiwiSaver investing in the shares of manufacturers of cluster munitions? 

Advisers Quick Guide: AMP's KiwiSaver Essentials

AMP's KiwiSaver Essentials was a smart way to offer a basic bundle of insurance to KiwiSaver members. Without requiring a lot of health evidence or burdening the client with a pre-existing conditions exclusion an offer was able to be made. How? Because of three factors that combine to reduce selection risk: an in-work test, low fixed benefit amounts, and a limited enrollment period. 

For advisers coming across the KiwiSaver Essentials product the key points you should probably retain are: Yes, pre-existing conditions are covered. The main difference between Essentials and Lifetrack is the IP benefit which is limited to full-time workers (30+ hours per week) and 13 week wait with a 2-year benefit period, and covers sickness only.

Last Days of the AFAs

David Chaplin has this report detailing the changes in AFA numbers and alignment over the last five years. Called 'last days...' because of the recommendation to end the AFA designation under the FAA review proposals, the report remains a good way to think about investment advice distribution in the medium-term - even after the changes that will end the designation. Link

Put this way - those worried about the future of provision of retirement advice by an already-low number of AFAs should applaud the admittance of RFAs into the ante-room to the provision of such advice. By erasing the categorical difference between being an adviser in, say, home loans or insurance, only one obstacle will remain to prevent hundreds if not thousands of new advisers advising on, say, KiwiSaver. Of course, the remaining obstacle is quite large, it is competence. But some advisers were keen to advise on KiwiSaver and will eagerly take to the required study. This could be good.