Recent global events remind me how lucky I am to call New Zealand home. There have been terrorist attacks in countries including the USA, Iraq France and Turkey in recent weeks, and the political and economic turmoil in Europe, headlined by the ongoing migrant crisis and the surprise Brexit result. New Zealand has its own challenges, but they seem small compared with what’s going on elsewhere.
I often say that if you live in New Zealand you have won the lottery of life, but this can come at a cost. The downside of living in such a safe and prosperous country is we do not always plan well for the future. New Zealand can be proud of its generous social safety net, but has the knowledge we will be looked after in tough times led to complacency? Whatever the reason, Kiwis are woefully unprepared for the one event in life that is guaranteed: death.
According to the Commission for Financial Capability (CFFC), about half of all Kiwis do not have a valid will. This rises to 70 per cent for those under 40. But many have an asset that could be left in limbo if they don’t have a will: their KiwiSaver account.
KiwiSaver has been fantastic for generating discussion about preparing for retirement. The next step is to move the conversation to what happens after we die. KiwiSaver can be a catalyst for this because for many Kiwis it either is, or will one day be, their biggest financial asset. Once your KiwiSaver balance goes over $15,000, you need a will to decide where the funds should go. With KiwiSaver almost a decade old, a significant number of members have funds above this threshold. If you die without a will, the High Court has to appoint an administrator for your estate and there is a chance of expensive legal wrangling. This situation can be a nightmare for all involved. Not only can it tear families apart, but the legal costs eat away at the estate, leaving your loved ones with less. If you do not want to put your family through this, you need a will. The financial security of my family is vital to me, and as the owner of New Zealand’s largest trustee company, Perpetual Guardian, I have a strong personal and professional interest in both KiwiSaver and wills. Having a will makes it easier for your loved ones at what will be the worst time of their lives, and it worries me to see so many Kiwis putting their families at risk by not having wills.
There are several reasons why, for all but the most prudent young KiwiSaver members, a will is the farthest thing from their minds when they join the scheme:
- Young people tend to think they are eight feet tall and bulletproof. With Gen-Y expecting to live to 100 years old, it’s easy to think death is a problem to worry about later. For most, this is right, unless we are unlucky.
- Common triggers for making wills are getting married and buying a house, and these events are occurring later in life.
- Low interest rates mean many people over 65 are choosing to leave their money in their KiwiSaver account to take advantage of the higher returns – it does not occur to many that this account is an asset, just as a house is.
The good news is there is a great opportunity to leverage KiwiSaver to generate more awareness about the issue. In my view, KiwiSaver providers should ask new members whether they have a will; something similar is done by Australian superannuation providers. In the meantime, make sure you have a will and do your mates a favour by bringing it up at your next bbq. Remember, a will makes it easier for your loved ones at what might be the worst time of their lives.
Andrew Barnes is the founder of Perpetual Guardian, which formed through the coming together of Perpetual Trust and Guardian Trust, and a director of Complectus Limited. He is also chairman and non-executive director of Perpetual Trust Limited.