A kick in the guts for savers

Written By: - Date published: 12:08 pm, May 22nd, 2010 - 53 comments
Categories: budget 2010 - Tags: ,

My wife and I are retired. We worked hard, we lived frugally, and we have a nest egg to get us through. Now John’s mob have come along and taken part of that nest egg away from us.

Staying clear of the finance companies, the best interest rate we can get on a term deposit is about 5%. Pay 21% (becoming 17.5%) in tax on that and it’s about 4% net.

That’s not much but it’s fine, until Bill English comes along and makes inflation 5.9%. Now our money is going to be worth about 2% less next year even with interest.

How does this reward saving and investment? What will it do to the nest eggs of retired people or young people saving to buy a house up and down this country?

53 comments on “A kick in the guts for savers”

  1. Kleefer 1

    I completely agree with you, this is indeed a kick in the guts for savers. Interesting that this site supports the Labour Party, which wants to change the Reserve Bank Act to allow for higher inflation.

    If you are concerned about your savings being eroded through inflation you should be lobbying the government to abolish the Reserve Bank and bring in a gold standard with 100% reserve requirements for banks.

    This would push interest rates up to the market level and allow the value of a dollar to increase over time, removing the need to gamble on stock markets to stay ahead of inflation. It would also remove the need for KiwiSaver and/or compulsory superannuation (which are blatant subsidies to the fund management industry).

    However, the gold standard would force fiscal discipline on governments, which would likely eliminate most of the wasteful government spending programmes people on this site seem so fond of.

    • Marty G 1.1

      Kleefer, getting away from the theoretical, you do agree that National has screwed over people with savings eh?

    • Pascal's bookie 1.2

      Kleefer, perhaps you could explain why the gold standard was dropped? I assume it’s some sort of conspiracy, but I’d like to know the players.

      Firstly though, and I bolded it because this is the important bit, a few questions you really need to answer.

      Does the US fed reserve have a sole focus on inflation?
      When did the US fed reserve begin it’s current ‘quantitative easing’?
      Have the US federal government, and it’s state governments been running a stimulatory fiscal policy?
      What would you predict would be the outcome from the above answers on US inflation?
      Has that prediction been borne out?

      So why should we not have a look at our RBA?

  2. Zorr 2

    I can only agree with this.

    My in-laws are retired and saved a small nest egg to keep them going through their twilight years and are partially relying on the fact that they were both public service workers (teacher + cop) and therefore getting a reasonable pension. This change to the tax system only cripples them and they have given their lives in the service of others (and still do) and I would be proud of anyone able to do their jobs as well as they did.

    Why is it that when it comes to money there is a large portion of the population that are so myopically focused on only their own wellbeing at the detriment of large swathes of the rest of the population?

  3. Fisiani 3

    Dear Guest
    The one off effect of GST will be just 2% if fully implemented but already stores like The Warehouse are promising to keep price stability and thus it could be less. Projections are that inflation will then plummet in the next two years. Always remember that there will be a two fold pension rise for you both. Initially 2% when Gst is raised then extra when the tax reforms come in. Remember that pensions are calculated on the average AFTER tax income which will considerably rise. I am sorry that I do not have the figures to hand to explain how much your income will grow. Stop listening to mischief making and go the the government website that will reassure you. Besides, the economy after stagnating for 9 years, will grow and provide the health care and support that hard workers like you deserve. National prides itself in actually caring for people.

    • Zorr 3.1

      Did you not pay attention to the post Fisiani?

      The guest poster was commenting on the effect on their SAVINGS not on their PENSION. (capitals to highlight that fact for the braindead)

    • Lanthanide 3.2

      “Besides, the economy after stagnating for 9 years”

      Except the economy didn’t stagnate for 9 years.

      Unless you were talking about 1991-1999, which then yeah, I might agree, but I think even those years managed to edge out a small increase.

  4. Fisiani 4

    Well here’s some free advice for savers. Consider putting some funds into safe bets.
    Invest in good Mining Companies. Invest in Tourism. Invest in any company that will boom along with NZ. Encourage Bill to open up investments in Kiwibank to Kiwis who want a better return.

    • Sam 4.1

      Why would anyone take investment advice from someone who can’t tell the difference between ‘levels of growth unseen since the second World War’ and ‘stagnation’ in macroeconomic terms?

    • BLiP 4.2

      Anyone investing in the rigged casino that is the New Zealand stock market is a mug. Buy gold, learn to grow your own veggies, and keep a shot gun beside the bed.

  5. Nick 5

    “until Bill English comes along and makes inflation 5.9%.”

    /facepalm

    The main reason inflation is running high is due to the amount of borrowing the government is taking on to sustain our welfare state.

    Would you prefer your Super to be cut and inflation lowered??

    Thought not.

    • Anita 5.1

      Nick writes,

      The main reason inflation is running high is due to the amount of borrowing the government is taking on to sustain our welfare state.

      How?

    • Lanthanide 5.2

      No, the reason inflation is going to spike to 5.9% is the GST rise.

      It’s pretty obvious when you look at the actual stats – it’s hovering between 2 and 2.5% for the quarters before the GST rise, and for 4 quarters (year-endings) after that it is above 5, then back to 2-2.5% once the GST increase has filtered through the stats.

      Try looking at the actual stats next time, before coming up with something you want to be true so you can use it as ‘evidence’ for your argument.

  6. Nick 6

    Anita,

    From quantitative easing and the Reserve Bank buying up bonds.

    Increase in money supply=increase in prices=inflation

    • Pascal's bookie 6.1

      NIck. perhaps you could answer my questions from upthread.

      or a least this very simple one.

      Where is the inflation in the US?

  7. Nick 7

    And anyway, are you able to claim with a straight face that inflation would be lower under Labour????

    Oh lawdy that would make my head spin…

    • Lanthanide 7.1

      As Labour has said they wouldn’t have raised the GST rate, then yes.

      I happen to agree with the GST rise, it is definitely a good thing to be doing. The problem is that the Nat’s have directed most of the tax cuts towards the top end, when it should be going to the low end to better compensate for the GST rise.

  8. Fisiani 8

    Taken from Kiwiblog

    While the tax scale is a bit flatter after the changes in the budget, it is still a highly progressive system when you look at the overall average tax rates at various income levels.

    Those who earn up to $40,000 pay no more than 15% income tax
    Those who earn up to $70,000 pay no more than 20% income tax
    Those who earn up to $110,000 pay no more than 25% income tax
    In other words 67% of taxpayers will be paying no more than 15% average income tax.

    88% of taxpayers will pay no more than 20% income tax.

    The top 12% of taxpayers will still pay 49% of all income tax, which I estimate is over 90% of net income tax!

  9. Nick 9

    Exactly Fisiani.

    The low paid pay barely any tax anyway, and in fact most people earning under $30,000 or so are in fact a huge net drain on society when you factor in all the goodies the “rich pricks” pay for for them:

    Roads
    Free healthcare
    Free schooling
    Interest free loans
    Accomodation supplements
    Working for Families
    Early childhood education
    and so on etc etc etc

    Tax payable on $30,000 is only around $5K, and you want to tell me that the wealthy, (without whom lower income people would live in third world conditions) are not paying their fair share?

    • Carol 9.1

      The problem is that the “rich pricks” pay themselves, and/or others at the top of the tree, too much, while the people earning least are not being paid enough or provided with enough jobs. If the pay scales were fairer, there would be less of a discrepancy in the amount of taxes people pay.

      And rich business owners need the roads so they can do the business that brings in the money, and to make sure the workers get to work on time so the business people can rip off the profits. Ditto for all the other things taxes paid for:

      health care – so there is a healthy workforce who can do their jobs efficiently & don’t take endless days off sick, or spread various bugs that would undermine the rest of the workforce, including the rich folks

      Accommodation – to house the workers, and others so the rich people don’t trip over or get constantly harrassed by them in the streets, and generally get in the way of their businesses

      Family supplements – so there is a well cared for & well socialised generation to participate in the future workforce & society in which we all live, rich & poor.

      Early childhood (and primary, secondary, tertiary) education so that there are well educated and skilled future workforce, as well as people with some understanding of the rights & responsibilities of citizens – and without all of that doing business would be difficult.

      etc, etc, etc.

  10. Nick C 10

    Its a good thing we have a strong reserve bank act to deal with inflation then…

  11. Gooner 11

    Considering the out of control inflation caused by Labour’s spending during the Clark/Cullen era, I find this post hilarious.

    • Pascal's bookie 11.1

      Yes, all those deficits Cullen ran, I still remember all the howls from the right about Cullen pumping too much cash into the economy.

    • Lanthanide 11.2

      Inflation was not “out of control”. It was high, but that’s because of the strength of the economy, and the dollar.

  12. jcuknz 12

    I have a query for Guest Poster … are your savings your own or as public servants did you contribute to National Provident or the similar Government scheme. As I see it it doesn’t matter what interest rate one gets on private savings unless you are working, or able to live on Nat Super, your savings are always going to depreciate by the inflation rate unless you compound the interest. If you ‘cash in’ the interest on savings you are left with a reduced amount. It has always be so and is just one of the unpleasant facts of life.
    Another “con” if you wish to call it that is the way Nat Prov add ‘inflation adjustments’ to the basic sum you retired at. But I guess it would be impossible for them to cope with adjustments on last years pension each year, though used as I was to inflation adjustments to my salary each year when I was a worker, it came as a unpleasant shock after I retired..

  13. Nick 13

    Ah Carol, yet another bleeding heart sop who thinks all the ills of the world can be cured by taking money off the hardworking to give to the bludgers…

    • Sam 13.1

      Isn’t that exactly what this budget did?

    • Carol 13.2

      No, Nick. I just know my history, and a bit about what actually happens in society. Go do a bit of research & learn why education was introduced in places like Britain for the poor & working classes. Look at why the British government became concerned about the health of the poorer/working classes (especially the ones who they wanted to use for cannon fodder, like in the Boer War) which gave impetus to improved health care & some other welfare policies.

      And go find out a bit about what really happens in society, including amongst the poorer classes. There are plenty of hard working people earning barely enough to support a family and/or who can’t get a job that will support them. And then there’s the rich bludgers (like that guy who riched off hard working people & pissed off to Hawaii), and the bludgers who gambled on other people’s money and/or money that didn’t really exist, to get rich & created the financial bubble & eventually the melt-down.

      Then maybe you can move beyond some of the rather superficial and distorted propaganda slogans produced by some people on the right.

  14. Nemesis 14

    Labour inflation good, National inflation bad. Keep repeating it often enough and you might win over one voter. Not enough to win over 200,000 voters.

  15. mike 15

    Nick – so in your world everyone can just ‘work hard’ and earn 100K salaries is that right? and anyone who doesn’t earn 100K is lazy and a bludger. Hello??? Get real. So retail staff, teachers, taxi drivers, bus drivers, nurses, hotel staff, cafe workers, people who build our roads, plumbers, electricians are all bludgers/lazy? I see you are with Roger Douglas in feeling it’s outrageous that the top 10% of kiwis earners pay 70% of tax. The other side of the coin you so conveniently ignore (it’s called greed) is that those 10% earn 70% of all income. Society ‘works’ by ensuring the majority of people get paid lowly so that the top earners have what they have. Trickledown wealth theories are pure economic theory dating from ..oh around 1910, that has never been shown to work any time, anywhere. It’s about time the greedy and the ignorant like you get a reality check, you do not work harder than those in the sample list of occupations above. You certainly don’t create any extra jobs with your tax cut from 38 to 3.3 cents. You get to keep all that dosh because most people get paid %%%$$ all. Think about it.

  16. Nemesis 16

    The good news Guest is under National you will have more options to invest your retirement savings in. Like a power company or a New Zealand bank. Labour doesn’t want you to have those options. They want to make all the decisions for you, like buying a bankrupt rail company to help out their rich Aussie mates who want to sell it off and then spend a billion dollars making it economically viable.

  17. Graham 17

    But Nemesis, Labour knows better than you or I.

    Like when they rejected the Canada Pension Plan Investment Board’s $1.7 billion bid for 40 per cent of Auckland International Airport. Apparently overseas investment is not good for the country …

  18. Nick 18

    Greedy and ignorant?
    No Mike. I currently work part time to pay my way through University. Am on about $20k a year.

    What I am sick of though is New Zealand’s tall poppy syndrome, people who can’t be bothered getting ahead because other people will pay for their poor choices, lack of hard work at school, poor work ethic, etc.

    I am about as low of an earner as you will find, but I (along with many, many others in my position) am heartily sick of paying tax only to see it going to useless cunts that have opted out of the system and getting a free ride.

    One thing is for sure, it is whining, ignorant people like you who are the greedy ones. It is people like you that contribute to our brain drain.

    And why don;t you think before pigeonholing someone as a “rich prick” before opening your mouth next time, because rich or wealthy I am most certainly not.

    [Please mind your language here. — r0b]

    • Anita 18.1

      Sense of entitlement – tick!
      Misogynist – tick!
      Foul mouth – tick!

      You’re such an advertisement for the right.

    • Anita 18.2

      BTW if you think $20k per year for a student is low then you don’t have a particularly strong grasp of what normal is.

      If you think that $20k per year is “about as low of an earner as you will find” then you don’t have a particularly good grasp of NZ income distribution or poverty. I suggest that you go work through some of the handy data sets on income distribution that Stats NZ has, and see if you can find anyone in your extended network who is genuinely poor and spend some time with them.

    • Bored 18.3

      Your argument is flimsy, your language worse! Ban in order for both tedious ill informed nonsense and foul tongue. Where the hell is a moderator when you need one?

      [Never too far away! — r0b]

    • Draco T Bastard 18.4

      Median income in NZ is ~$28k so, generally speaking, you’re well off compared to a lot of people.

      Greedy and ignorant? Yep, you sure are.

  19. Nick 19

    “Yes.”

    I agree 100%.

    “Get real. So retail staff, teachers, taxi drivers, bus drivers, nurses, hotel staff, cafe workers, people who build our roads, plumbers, electricians are all bludgers/lazy?”

    I don’t know if you are being deliberately stupid or whether you have some reading difficulties, but when did I call people in any of those professions lazy?

    The people I mean are dole bludgers, people who have armies of kids they cannot afford and expect the rest of us to pick up the bill, people like the original poster of this thread, who most likely pay no net tax after receiving their NZ Super, but still have reason to have a whine about it. It is people like these who are the reason our economy is in the toilet, not hardworking kiwis on lower incomes.

    • Lanthanide 19.1

      “people like the original poster of this thread, who most likely pay no net tax after receiving their NZ Super, but still have reason to have a whine about it”

      Gosh. These people have savings that are being eaten up by the rising inflation. You know where savings come from, right? From saving up money that you previously earned doing hard work. In other words, they worked in the economy, PAID TAX, and saved some money for the future like responsible people should. But you say because they aren’t paying tax *now*, that they have no right to complain about their savings now being diminished?

      What would you prefer: no one saves for their retirement, because of fear of future inflation risks (and being told to ‘stop whining and live with it’) forcing the government to fully fund everyone’s retirement; or people saving for their future because they trust the government not to fuck everything up just as they get into their golden years?

      You really need to think before you post, because a lot of what you are saying is just knee-jerk drivvel.

  20. Nick 20

    “that has never been shown to work any time, anywhere.” (citation needed)

  21. Nick 21

    “Sense of entitlement tick!
    Misogynist tick!
    Foul mouth tick!”

    You are talking about me? Show one piece of evidence that I am any of those things. It sums up the left perfectly, 1 and 3 especially.

    I love it how the left resort to name calling when their argument falls flat…

    • Anita 21.1

      I suggest you reread your comment that I was replying to and consider your use of the phrase “useless cunts”.

      BTW it would help a lot if you started to use the handy reply functionality.

      captcha: teeths <—- that's not even a word!

  22. Nick 22

    “BTW if you think $20k per year for a student is low then you don’t have a particularly strong grasp of what normal is.

    If you think that $20k per year is “about as low of an earner as you will find’ then you don’t have a particularly good grasp of NZ income distribution or poverty. I suggest that you go work through some of the handy data sets on income distribution that Stats NZ has, and see if you can find anyone in your extended network who is genuinely poor and spend some time with them.”

    /facepalm
    $20k a year is not much after tax, kiwisaver, rent etc.

    My point is I have got off my arse. Anyone who is on much less than 20K is either getting government assistance or not working much at all, with other means of support.

    And your point is anyway?

    • Anita 22.1

      My point is that you don’t have a very good grasp of NZ income distribution or poverty, as you have demonstrated.

      I was, perhaps too subtly, suggesting that you might want to gain an understanding of both so that you can engage more meaningfully in debates about them.

      • QoT 22.1.1

        Oh, Anita. You and your logic. Don’t you understand, Nick feels like his life is so crap he MUST be on the very, very bottom of the heap. I mean, come on, $20k a year! And Nick feels it, ergo it must be true! It certainly couldn’t be that $20k a year for a student actually puts him in a hugely better financial position than a hell of a lot of people in NZ.

        • Lanthanide 22.1.1.1

          Or very definitely in the upper 10-20% of students working while studying.

  23. starboard 23

    Nick…Labour good..National bad…just roll ya eyes and move on…

    • Lanthanide 23.1

      Yeah, who cares about actually giving any kind of rational thought to other people’s arguments. Better just to roll your eyes because you know better.

  24. jcuknz 24

    I don’t think Labour or National have a monopoly on good or bad, but what Guest Poster complains about happens under both and irrespective of the amount of capital one has. One consolation will be that with 5.9 inflation our super will go up .. so if it is just a small nest egg one could be no worse and possibly better off. Swings and roundabouts.

  25. mike 25

    Nick – what you did say is “in fact most people earning under $30,000 or so are in fact a huge net drain on society “. Hello??? Most people in NZ (ie those who earn this level or less, still do a job necessary to make society work. All those people cannot just worker harder and get 100K salaries – you must know that. Society “needs’ the majority to earn low incomes so taht the well off can have their cake and eat it to. So what National have done is say stuff you lot you can have a few bucks a week and help pay for the already high incomed to have $50, $100 or $250 a week more….at the expense of the honest hard working. You infer these people are all lazy bludgers and a drain on society. Well if you earn $20KJ that puts you in the ‘drain on society category” Moronic logic. By the way do you really think those on $100K will generate more jobs with their few extra grand a year??? Cut out the vile language to eh if you can.

  26. Nick 26

    Mike if you can’t understand a simple 5-6 line post, then I am not going to be able to correct your completely bizarre and incorrect last post either.

    Just keep thinking to yourself: Labour Good, National Bad.

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