Grey Power’s Bill Rayner does not intend to be rated out of his home, and wants the Government to help other superannuitants do the same.
Grey Power plans to call on politicians to commit to creating a Government-run equity release scheme.
Bill Rayner from Grey Power lives in the upmarket Auckland peninsula suburb of Devonport, and rates rises have forced him to supplement his NZ Super by taking out a reverse mortgage on his home to enable him to stay living there.
But Rayner and Grey Power believe the Government should play a role in making equity release a cheaper option for asset rich pensioners struggling to get by on NZ Super alone.
The idea is that the Government could use its borrowing power to source cheap funds to lend to retirees who own their own homes. In turn the Government would secure its loans to pensioners against their homes.
The money borrowed would be available for pensioners’ to maintain their homes and lifestyles, and like a reverse mortgage from the likes of Heartland Bank or TSB Bank, would only be paid back once their home was sold.
But unlike the private loans, instead of paying high commercial rates- currently 7.6 per cent at Heartland Bank – pensioners would get loans much, much cheaper, limiting the compounding effect, and preserving more of their equity than if they had a commercial loan.
“The concept was a limit of $10,000 a year,” Rayner says. “You could draw down on a loan with an interest rate of say two per cent.”
The Government’s ten-year borrowing rate is just under 3 per cent, but Rayner says, one option would be for the Government to provide the loans interest-free to superannuitants.
The plan is still in development but Rayner says more needs to be done by Government to help older people stay in their homes in the face of large annual rates rises, cost of living increases, and persistently high insurance costs.
Some councils do run rates deferral schemes, which are like mini-equity release schemes with debts secured against ratepayers’ homes, but they are little known, and are not available in all areas.
Pensioners relying on investment income are suffering
Last updated 16:42, March 3 2016
Low interest rates are good for borrowers but painful for savers.
Warning, current term deposit rates are likely to cause an injury.
Before phoning your bank, ensure a couple of rolls of Sellotape are placed under the wheels of your office chair. When faced with financial shock, the fast twitch muscles in your legs may create a propellant force, firing the chair backwards and denting the gib-board behind you.
For those who haven’t rolled over a deposit in a couple of years, the added protection of a bicycle helmet is advised.
This handy advice is sourced from recent experience – as recent as a few hours ago in fact. I invested some money at 2.8 per cent today. That’s the gross rate of interest and tax is still to come off. It hurt a lot.
Sure, it was only for a fixed term of three months so you’d expect some unpleasantness, but “2.8” felt like a tar and feathering. Mid-2015 the same deposits were paying an average of 3.6 per cent. That’s a fall of more than 20 per cent in savers’ income.
For the retired population reliant on interest, the carpet has been pulled from under them. Pensioners tend to hover around three-year and five-year fixed rates to get certainty of income, but even these look like road kill.
The average three-year deposit is currently paying 3.68 per cent, down 27 per cent in just over 18 months (from 5.05 per cent). There’s a worse picture with five-year deposits. Currently averaging 3.79 per cent, they’ve staged a 31 per cent fall from 5.53 per cent.
Many retirees get a good proportion of their income from interest bearing instruments. Imagine a wage earner -experiencing 20 to 30 per cent swings over such short periods. It’s entirely different when rates are higher, as despite the volatility you are still left with net income levels that are decent.
Taking tax off deposits at these paltry rates leaves very little in the pot.
A call for tax-free accounts
While much is written about alternatives such as equity income funds, bonds and the unavoidable capital drawdowns, there is always a need with retirees to keep some fairly hefty amounts of savings in cash.
It’s a massive shame we don’t have a tax-free savings regime such as the UK. With other asset classes such as shares and property having tax advantages for long-term investors, cash is the poor cousin.
When you learn about the British tax-free accounts, they’ve had their share of complications, but are hard to fault in purpose and usefulness.
More recently they’ve become very simple. Each person is allowed to put £15,240 ($32,425) into a tax-free account each year. Yes, that’s every single year and couples are allowed one each so the amounts double in a family. They’re known as ISAs (Individual Savings Accounts).
Kids under 16 get a JISA, a junior version allowing tax-free savings of £4,080. Each tax year a new account can be opened.
The whole amount can be put into cash deposits, shares, or split in any fashion. If you withdraw money, you can’t top it back up and any unused portion is lost. It encourages regular savings patterns and helps alleviate some of the pain of low interest rates.
In addition, come April, the Brits are introducing a new Personal Savings Allowance which means the first £1000 interest earned in any account is tax-free.
While interest rates are cyclical and won’t always be at these levels, the need for a system to promote simple savings and protect the more modest saver from tax would partially level the playing field. We don’t need a dual system like the British or even such a generous one.
Most of us would agree, any tax-free savings band would be positive.
* Janine Starks is a financial commentator with expertise in banking, personal finance and funds management. Opinions in this column represent her personal views. They are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product. Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.
Gordon Campbell on why we’re sitting ducks for the power companies
February 25th, 2016
The marketing campaigns waged to induce customers to chase around between electricity companies in a frantic search for savings has always looked like a diversion. Yet according to RNZ this morning, we’re about to see more being spent on this kind of marketing by energy companies.
Earnings in the energy sector meanwhile, remain pretty healthy. And retail earnings from consumers and dividends are still way up, despite this headline.
Thanks to the government’s asset sales programme, ordinary citizens will not only be paying for that extra marketing via their power bills, they’ll also be getting a smaller share of the state energy company dividends, from the likes of Meridian. (More of these dividends are going straight into the pockets of the tiny minority of private investors able to take advantage of the energy company selldown.)
As we look towards winter, it may pay to ask some basic questions about the direction in which power bills are headed. In one small column, I’m not presuming to provide a comprehensive overview… yet arguably, the energy companies that currently dominate the electricity market are in a sunset industry. And since wealthier users will be better able to afford to move to the new technologies (eg solar) the poor could well be the last, sitting ducks left on a national grid system that is busily trying to maximise its returns in its golden autumn years.
As that scenario plays out, there will be no point looking to the Electricity Authority to protect the consumer. Sure, it has a statutory obligation to protect the ‘long term’ interests of the consumer, but its more pressing obligations are to protect the investors, by delivering them ‘certainty’. Section 2.2 of its 2010 Consultation Code document said so, explicitly:
The primary purpose of the principles is to provide industry participants with greater predictability about decision-making on likely amendments to the Code, to maximise investor certainty.
1.Why are fixed charges, if anything, always going up ? The fixed charges element on your power bill is – beyond a few soothing catch phrases – one of the bill’s more mysterious components. Down the years, consumers appear to have derived no benefit at all from technological advances, which should have seen the fixed charge component decline. Yes, there has been some re-investment in the grid; and in some years, that has been considerable. Demand though, has been flat-lining since the GFC, so capital investment in new plant hasn’t been a pressing priority for quite some time. As one investment analyst told RNZ this morning:
Yes, these [electricity] companies do generate strong cash flows. A lot of that is due to the lower level of maintenance [and] capital expenditure they require, versus depreciation.
Clearly, the price benefits from this situation aren’t being passed on, beyond the superficial smokescreen of the artificial ‘competition’ occurring within fixed boundaries. (Much of these savings are derived from the minor differences between companies over the variable rate ie the cents per unit, per kilowatt hour.) Meanwhile, the energy companies remain coy about how their entire fixed charge income stream is broken down, and justified.
The prominent role played by the fixed charges mean there is less incentive to restrict electricity usage – since that isn’t reflected as much as it should be in the power bill. More flexible, more interactive pricing models would reduce demand, and the related need for capital investment. But that’s the problem: companies have a vested interest in their customers using more electricity, not less.
That’s one reason why they like fixed charges, which ensure a predictable flow of money in the bank. It is very much like a supermarket charging you the moment you walk in the door, irrespective of how much produce you put in your trolley. Supermarkets can’t do that, but energy companies (and to a lesser extent, phone companies) can, and do. Clearly, there should be more regulatory oversight of the energy companies to limit the extent to which their fixed charge regimes are extortionate.
2.Is there worse on the way ? Yes. For a couple of years now, the Electricity Authority has been examining variations on a new end-user system of transmission pricing, which will essentially be based on the distance from the point of generation.
Quite accidentally I’m sure, the end result of one of the options on the table would be that the Tiwai Point smelter will enjoy a massive cut to its power bill – of anything up to $50 million a year – while consumers situated in New Zealand’s far flung and impoverished regions like Northland and West Coast (and also BTW, Auckland) would see a large hike to their power bills.
For Coasters this would be a double whammy. Since 2011, they have also been paying for the gold-plated 110kv line capacity installed to service the now-defunct Pike River coal mine.
- 3. Are there power companies operating with a model that responds more directly to actual use?
Yes, the explosive growth of Flick Electric has been largely driven by the way that its pricing mechanisms expose its customers to the gains – and to the risks – of price fluctuations on the electricity spot market. If you’re willing to use smart metering to track your usage and tailor it accordingly (while riding out the spot market peaks as thriftily you can) the returns are claimed to justify the effort. As this report on Flick’s recent foray into the sharemarket says:
Flick charges customers the wholesale price of electricity, plus a defined profit margin. This means that a customer’s bill could fluctuate substantially from day to day depending on events influencing the national grid, but overall Flick claims to save its customers ion average 18 per cent. Some customers use the tariff structure to ‘game’ the system, by frequently checking the wholesale price and using their appliances at times of low prices, or cutting use when the price spikes.
Later columns will examine the transmission pricing options more closely. Overall though… extracting money from captive customers has been a feature of the economic reforms in New Zealand since the 1980s. In a situation where wages and benefits have been flatlining, it is little wonder that the social effects are becoming more evident, daily.
Elderly lives could be saved by new drug harm prediction system
10th February 2016
Doctors could be able to electronically calculate the risk before medicines are prescribed to the elderly, saving lives, if a new system being tested in New Zealand proves successful.
Eighty-thousand New Zealanders are involved in a new Otago University study to reduce over-medication harm.
Side effects from medications cause around 15 per cent of hospitalisations among the elderly and overseas studies suggest one in five prescriptions may be inappropriate.
“It’s very hard when each drug has 10 side effects and somebody’s on 20 medications to work out whether they’re possible side effects from which drug,” said Dr Hamish Jamieson, Otago University researcher and geriatrician.
New push underway to reduce hospitalisation of elderly people
Researchers are testing the latest health technology to see which older patients are at risk of overmedication. Source: ONE News
The study is comparing patient outcomes on a nationwide health database with results from a newly-developed electronic measure called the Drug Burden Index, or DBI, to see if the DBI can accurately predict which elderly are most at risk of drug harm. Early overseas trials indicate a high DBI is a good predictor of falls, fractures, loss of independence and even death.
Researchers say if the Drug Burden Index does predict adverse side effects from drugs, it could allow doctors to electronically calculate the risk before medicines are prescribed to the elderly, preventing harm and saving lives.
A high DBI calculation score would throw up a red flag on the doctor’s computer.
“So the patients and clinicians can see that and use that to together decide if continuing to use these medications is appropriate,” Dr Jamieson said.
If not, the patient can be taken off that drug or prescribed another.
It’s hoped a pilot project with GPs and pharmacists might be underway by the end of this year.
“Click Here” to view an article from the Christchurch Press from Tuesday 19th January 2016- SuperGold card free transport for seniors under stealth attack