The answer for one mid-40s couple feeling bogged down by mortgage payments and interest-only loans could be to sell their rental property, clear the debt and consider more investment in KiwiSaver or managed funds, Mary Holm writes – as long as they spend a little money on having some fun. Photo / 123rf

Why do we feel we are getting nowhere?

Q: My husband and I are in our mid-40s. We have about $200,000 each in our KiwiSavers, and our home is mortgage-free.

We also have a rental property. We’re renting it out for $650 a week and we need to topup $844 fortnightly for the mortgage. It’s a residential house in Auckland. Some of our loans are interest-only to keep costs down.

We feel we’re going nowhere with it. If we sold it today, we would have about $200,000 in cash.

We were planning to keep the rental property until we retired, but we’ve realised we won’t be able to pay it off before we retire.

Are we better off putting it all in our KiwiSavers? Or a managed fund? We would like to have a bit more money to live our current lives, as we have been very sensible with our money.

A: Your last sentence is the clincher.

I expect you bought the rental at a time when property values were growing really fast. But Auckland house prices reached a peak in early 2022, fell over the next year or so and haven’t really gone anywhere since.

It’s hard to imagine that flat line will continue for the next 20 years, but most experts aren’t predicting a return to rapid growth.

Meanwhile, of course, we can’t predict what will happen to balances in KiwiSaver or other managed funds either. It’s quite possible growth in shares and bonds will be slower than in houses. Or both types of investments will boom. Who knows?

In the absence of a crystal ball, there’s a lot to be said for choosing the investment you prefer. It sounds as if you feel weighed down by those mortgage payments – and perhaps the feeling that you’re getting nowhere with the interest-only loans. Sell the rental and get rid of the debt!

You’re in a pretty strong financial situation for people your age. I suggest you put some of the freed-up money in either KiwiSaver or a managed fund – it doesn’t make much difference which, except you have access to a managed fund. But do spend some on fun.

Rebuild after redundancy

Q: I was made redundant over a year ago and since then I have been doing a mix of casual work and contract work, along with having some family support to survive on my journey back to fulltime employment.

I have KiwiSaver and an investment fund which have remained untouched during this time. Last year, I was able to contribute the minimum amount to KiwiSaver to enable me to get the Government contribution before it decreased.

I paid off my student loan years ago and don’t have any hire purchases or other loans. I own my own home and have a mortgage, so this has been a challenging time.

What would you suggest I do to rebuild my savings quickly and what I should focus on to rebuild financially? I’m in my 40s and while retirement is still quite a way off, my goal is to retire comfortably.

I know there are many others like me in this situation, and unless you’ve been made redundant, you aren’t always aware of the financial impact it can have.

A: Well done, you! It’s great that you’ve managed without using your investments and have even put a small amount into KiwiSaver.

You might want to keep up the KiwiSaver contribution – perhaps setting up an automatic transfer of $20 a week so you continue to get the maximum $261 a year from the Government. While that’s only half of what it used to be – and a quarter of what it was for many years – it still multiplies your contributions by 1.25, which is a good boost.

Beyond that, I suggest you talk to your mortgage lender about using any available money to pay your mortgage down faster, with the ability to withdraw that money again if you need to.

It’s a good way to set aside emergency money, in case your income stops for a while. And paying down a mortgage fast is the equivalent to earning whatever your mortgage interest rate is on that money, and there’s no tax. It’s a good, solid investment.

You may have to wait until a fixed term has ended to set this up, storing the money up in a savings account or term deposit in the meantime. But small extra payments are often permitted during a fixed term.

Some would say you might be better off putting that money into KiwiSaver or your other fund. It depends whether the future return – which nobody can predict – is higher than your mortgage interest rate and whether you want to take that “gamble”.

KiwiSaver for granddaughters

Q: ASB tells me it is not possible to transfer money from my Kiwibank account to my granddaughters’ ASB KiwiSaver accounts.

The only option offered is to draw cash and make counter deposits, which is a bit tough for 87-year-old grandparents and requires an ASB profile.

If our granddaughters were to change KiwiSaver provider, do any of the low-fee providers you favour accept bank transfers?

A: Some wires have got crossed here.

“Your reader can absolutely make a bank transfer from their Kiwibank bank account into their grandchild’s ASB KiwiSaver account, via their bank’s online banking services, by searching for ‘ASB KiwiSaver Scheme’ as the payee, or at their bank’s branch,” ASB says.

“They can set this up as an automatic payment or do a one-off payment, using the grandchild’s KiwiSaver number, grandchild’s IRD number and grandchild’s surname as the references.” If you need more info, it’s on the ASB website.

“With regards to further instructions on the process via Kiwibank’s online/branch banking services, we suggest you reach out to Kiwibank.”

The bank adds: “We’re sorry your reader has received inaccurate information regarding this issue. We’d be more than happy to support them via retire@asb.co.nz.”

I hope you can set up the contributions for the girls. It’s a great idea to drip-feed even a small regular amount into a child’s KiwiSaver account. It’s surprising how it grows over the years.

And once a teen is 16, their account will receive 25 cents from the Government for every contribution into their account, up to $261 if contributions total $1043 or more a year. The contributions can be from anyone.

Isn’t it just dating?

Q: I was bemused by the concept discussed in your last column, live-apartnerships. Isn’t this what anyone else would call “dating”? What’s the difference?

A: There’s no official definition of a live-apartnership. It’s just a word I made up! But I thought we needed a term because it is, indeed, different from dating.

When you’re dating, there tends to be an expectation that the relationship will either develop further – perhaps into living together or marriage – or it will end.

A live-apartnership tends to be a steady relationship that both sides are happy to leave as it is, maybe over many years.

Typically, the two people get together most evenings or weekends or whatever works. In between times, each one runs their own home, pays their own bills, and lives most of their lives in whatever way they choose.

‘Coming after my savings?’

Q: This is not a formal letter, however, I have an observation for you, around the clarity of your response to the live-apartnership question in your last column. In the questioner’s penultimate paragraph was a specific question about “anyone coming after my savings”.

As I understand it, including from the MSD response you reported, the testing of joint assets is undertaken for the purpose of deciding whether people (her male “partner” in the example) would qualify for entitlement to the residential care subsidy. I don’t believe there is any suggestion someone would be looking to take her savings. Although, if he and his trust ran out of funds for his future care, and her level of savings did in fact mean he didn’t qualify for the subsidy, then she might be inclined to assist him. Apologies if I’ve misunderstood the matter.

A: You’re quite right. And it’s a point I should have made last time.

Of course the Government cannot take somebody’s savings to use to support someone else!

Here’s what happens. When a person is going into long-term residential care in a hospital or rest home, they can apply to the Ministry of Social Development (MSD) for a residential care subsidy to help pay for that care.

The ministry will look at their assets and income then pay the subsidy only if they are below the thresholds. If the person has a partner, the partner’s assets will be included.

As the MSD said in my last column, its position is based on “the notion that for a person who is married, or living in the nature of marriage, spouses and de facto partners owe primary obligations of support to each other, and that the state’s support obligations are secondary”.

So it’s not a matter of the Government taking anyone’s money. But if the person going into care has a spouse or similar, the Government basically says: “We expect you and your partner to support your care until your joint assets drop below the threshold. Then we’ll step in to help.”

One other point about the reader’s letter: she assumed her partner would be the first to need residential care, presumably because her health is better than his. But it doesn’t always work out that way.

Slow process

Q: I’ve recently transferred my KiwiSaver into a low-fee passive fund.

The provider, Simplicity, has a front-of-app section that shows recent transactions. I’ve noticed that it takes about 10 to 12 days for my and my employer’s contributions to show up, and then they sit pending for about three days before the funds are actually added to my balance. That’s more than two weeks from when I was paid.

Previously, I don’t know how long it took for transactions to show in my balance, essentially because I was with another provider and it wasn’t so transparent in their app.

Do you know why there’s such a delay with Simplicity, in a time when moving money around has become much, much quicker? And who is earning the interest while that money is not in my KiwiSaver ?

A: Your money takes a bit of a journey on its way to your KiwiSaver account. And, it seems, it’s not fair to blame the provider.

“A delay of 10 to 12 days from payday is possible,” Jennie O’Donovan at Simplicity says, “but this part of the process happens largely before the money reaches Simplicity.

“Employee and employer contributions are deducted through payroll and paid to Inland Revenue, which then processes and forwards them to the member’s KiwiSaver provider.

“The timing depends partly on the employer’s payment cycle. Employers pay deductions to Inland Revenue either monthly or twice monthly, although they may choose to pay more frequently.

“Inland Revenue advises that employer and employee contributions can take up to a month from the date they’re deducted to appear in a member’s KiwiSaver account,” she says. Once the money gets to Simplicity, it “generally appears as a pending transaction within two working days, and can be seen in your balance within three to four working days”.

“The provider identifies and reconciles the payment, applies the appropriate unit price and allocates units to the member.

“Simplicity uses the unit price for the day the funds are identified as cleared in the fund’s bank account.

“Because unit prices are confirmed after the assets and transactions have been valued and reconciled, there is a short delay before we can confirm the number of units purchased and display the completed transaction.”

In response to your question about interest earned, she says: “Inland Revenue pays interest attributable to the member on employee and employer contributions while they are held in its KiwiSaver holding account. Inland Revenue passes that interest on for the member’s benefit and it is credited periodically.”

I asked O’Donovan: “Does it take a similar amount of time for other providers?”

Her reply: “The employer-to-Inland-Revenue part of the process is common to all KiwiSaver providers, so members of other schemes can experience similar delays.

“Individual providers may have different reconciliation, unit-pricing and display processes once they receive the money.”

She adds: “Simplicity’s app may make the different stages more visible by showing the contribution as pending before it is fully reflected in the member’s balance.”

It’s a fair point.

• Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a former director of the Financial Markets Authority, the Banking Ombudsman Scheme and Financial Services Complaints Ltd. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@maryholm.com. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.

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