The super modelby Guyon Espiner
The country faces a looming superannuation crisis. Enter the Retirement Commissioner, who has some surprising views and is ready to make radical moves.
As an advertising strategist turned Retirement Commissioner, Diane Maxwell has gone from convincing people to buy things they don’t need to persuading people to save all they can.
Now she must call on all those powers of persuasion. Halfway through her three-year term and faced with a Mexican stand-off between the major political parties, she is trying radical new steps to engage the public in the savings debate – including entering the TV-making business. More on that surprising tactic later and the surprising nature of Maxwell herself (imagine what a Retirement Commissioner looks like and jettison the image).
But first let’s deal with the forces she’s up against. They are fearsome. She’s battling human nature itself, with its destructive urges of consumption, consumerism and short-term thinking, and she’s battling the politicians who pander to that mindset because their survival depends on it.
The super debate runs like a pantomime. The cast of players shuffle about the stage feigning ignorance of the fiscal monster lurking behind them. The audience constantly shouts out – “He’s behind you!” – but the wilful blindness continues and the show goes on. The monster is so big he can be ignored. Numbers like $30 billion (the annual cost of super by 2030) or 1.5 million (the number of New Zealanders aged over 65 by 2061) are unscalable mountains.
To even acknowledge the monster exists invites humiliation and rejection. Labour ditched its policy of raising the pension age after losing the past two elections. Labour leader Andrew Little’s recent jab – a timid poke at the monster with a “means testing” stick – lasted just hours before he surrendered. National booted the $1000 KiwiSaver kick-start into touch in this year’s Budget, but only because 2.5 million have already pocketed it so it’s unlikely to cost votes. John Key has pledged to resign if the pension age goes up while he’s Prime Minister.
So what’s to be done in the face of this collective evacuation of courage? A problem of this scale requires a superhero. Fortunately, savers do have a saviour. But there is a problem. Superheroes have really cool names. This one does not. She’s called the Retirement Commissioner.
A TOUGH SELL
I know what I expected from the Retirement Commissioner and it wasn’t this. Dressed in jeans and a stylish, casual top, she greets me in an open-plan office on Auckland’s waterfront that looks more like a wine bar or a trendy apartment than a reliquary for policy wonks and public servants. And this is a shameful prejudice, I know, but I thought the Retirement Commissioner would be an old person talking to and about old people. Maxwell is 48 with a three-year-old son and a 13-year-old daughter – she knows first hand that saving is actually an issue for young people.
As a former bank public relations executive and regulator with the Financial Markets Authority, Maxwell has a head for detail, but it’s her ad background that allows her to sell a dull subject in phrases that would sparkle on billboards. Savers: think little and long. One day the pension will be later and less. Inheritance will be little more than some words of wisdom. Maori and Pasifika savers need to realise that wealth doesn’t mean yachts. Generation Rent should take a fake mortgage rather than weekends in Sydney.
We’ll unpick all that later, but listening to her you get the sense that while she can advocate for policy change, she knows the politicians are too frightened to act so she must help us save ourselves by saving. It’s a tough sell – “Don’t buy that!” – but it helps that she has the ability to surprise. Take her own experience with money. This is not some frugal aunt who reuses teabags and nags at you to pinch pennies. “I was terrible with money for years,” she says. “When I worked in London I earned good money and I spent an extraordinary amount of money on holidays in Paris for the weekend on Eurostar. I thought I would always earn good money.”
Her daughter changed all that. Suddenly Maxwell was a single mum and profligacy turned to penury. “I’d think, seriously, ‘I am buying an egg for me and a piece of steak for her. I can’t shell out for a second steak – and what did those shoes I bought in Paris cost?’ I couldn’t believe that I had done that to myself. It’s a good lesson that what you do now is what you do to yourself in the future.”
Some lessons are only learnt through experience. “If people have always earned good money and been okay with money, they have absolutely no idea about the desperation you feel when you don’t have enough. You cannot teach them that. You have to be sitting there frightened to open the post, going through the checkout with your Eftpos card thinking, ‘Please don’t decline, please don’t decline.’”
EATING YOUR HOUSE
If the big fiscal picture is frightening, the personal outlook for savings can be daunting too. The Financial Services Council estimates you need a nest egg of between $300,000 and $450,000. Even $390,000 would only give you an extra $300 a week for a 25-year retirement (on top of the $374 after-tax, weekly pension rate for singles). Maxwell doesn’t like these targets. They’re too depressing and people just give up. She recommends setting a tailored, achievable goal and having a good idea of what the world might look like when you retire.
So what will change? For a start, future generations (except the very rich) can forget about inheritance. Longer life spans will see people spend 30 years in retirement, and to fund that, homeowners will increasingly use reverse mortgages and home equity release products. “Dip into that and by the time you pass away I don’t think you will be leaving a mortgage-free property.” In the future, inheritance will be “some wisdom and some kind words and then you are on your own, because I think retirees increasingly will be burning through everything they’ve got”.
The idea is already prevalent in the UK. As one of its Treasury officials put it to her on a recent visit: “We would expect you to raid your home like any other asset. If you had a pot of $100,000 sitting over there, you could never say, ‘Oh no I’m not touching that.’ And in the same way, they see your house as a pot of cash that you are going to dip into to sustain yourself across your retirement.”
70 TO BECOME THE NEW 65
The number of people aged 65-plus in the workforce has already changed dramatically in the past few decades. In 1990 it was less than 2% of the workforce. Now it’s approaching 6%. In the years to come, work colleagues aged 70-plus will be common. Maxwell predicts the pension age will follow suit. Although the politicians aren’t acting yet, she says it’s wise for 40-year-olds to bank on having to wait until they’re 70 to get super. “Thirty years out, I would see it at 70, and I think that will just be the new normal.” She wants the pension age linked to life expectancy. Set it at, say, 30% of life expectancy. So if life expectancy is 100, the age of eligibility would be 70.
Ah, the politicians say, but what about manual labourers? Well, Maxwell got a group of them together and they talked about it over a few beers. “They said 65 is neither here nor there; 65 to 67 is irrelevant – 50 is our problem. One guy had a shoulder reconstruction already and he was in his early forties. Fifty is your pressure point. When people move into their fifties, we should be looking at programmes to enable them to shift into a second career, to have another 20 years of working.”
She also wants super to increase at a lower rate to make it more sustainable. Currently it’s linked to the average wage, meaning it rises a lot faster than benefits, which are linked to inflation. Maxwell favours a mid-point between the two. As for means testing – forget it. It’s expensive to administrate and sends a terrible message. “It says to people who have saved, and at times gone without and been really careful across a lifetime, ‘You have done all that, aren’t you fantastic? You’ve paid tax for the past 50 years, you’ve been really good and you didn’t go on that holiday and you didn’t drive a Merc and you’ve got some savings, so guess what? You’re not going to get government money.’”
But she does think it’s worth looking at lifting the bar for immigrants. Currently you are eligible if you have lived in New Zealand for 10 years since you turned 20 (five of those 10 years must be after age 50). Maxwell says population changes will put pressure on this aspect of the scheme and “uncomfortable, difficult things” like this need addressing.
MAORI TO PASIFIKA PROBLEMS
A stick figure on a whiteboard. This is you, Maxwell would say, in her workshops with Maori and Pasifika, a group with high birth rates and poor savings records and hence one of her top priorities. But there was a problem with her picture. The way we talk about savings – most notably in KiwiSaver accounts – is often from an individual perspective.
“I was drawing a diagram with this little stick figure saying, ‘This is you.’” Her partner is Samoan and Maxwell knew where she was going wrong but wanted to see the reaction. “The reaction was, ‘Who is this stick figure? That’s not how I think about it.’ So we start thinking about the collective obligations.”
But there is the collective good, and collective not so good. In Pasifika communities, people are often called on to fund the expenses of friends and family – everything from funerals to the new roof on the local church. “Often there is not the savings base to pay for that, so people go down to the pay-day lender. And then you get high-interest debt, you miss a payment, the interest rate goes up with a risk premium, there is a penalty and on it goes.” The “mentality of scarcity” is also prevalent. “Scarcity is a way of thinking. It makes you think short term, it makes you think in a frantic way. You think insurance is dead money – right up to the minute you write your car off.”
Maxwell has her critics for focusing on Maori and Pasifika – “someone told me this is just political correctness gone mad” – but says it’s an economic reality that can’t be ignored. While many are struggling to save, there are successes.
“One guy who made a real impression on me was a young Maori guy out of South Auckland who works in Countdown. He’s got $9000 in his KiwiSaver and he’s going to be the first person in his family to own a property,” she says. “It makes them winners. Someone who financially felt like a loser – when he started talking about it you could just see him get taller.”
She has no sympathy for the idea of Maori and Pasifika accessing super earlier, despite life expectancies some seven years lower than Pakeha. “Retirement policy is not the place to address those issues. You’d only do that if you felt that all your investment in education and health care was going to fail. My husband is Samoan, my son is Samoan … I don’t want to believe we won’t address this.”
What she does want to address is the perception of wealth. “I had a Pacific person say to me, ‘You’re missing the point: Pacific Islanders don’t care about money.’ And I say, ‘This isn’t about yachts or Prada shoes. This is about paying the rent, heating the house, buying food, paying for school trips – the stuff we all need every day.’” This is a big hurdle for some in the Pasifika community who believe that stashing money away or refusing community calls for help is mean-spirited.
Again Maxwell calls on personal experience. “My mother-in-law came to New Zealand as a young Samoan woman, didn’t speak English and is now mortgage-free, having raised two boys on her own with some savings. She did that because at times she said no.”
THE OTHER BIG ISSUE
If there is a public policy issue big enough to rival super, it’s probably housing affordability and, of course, they are intertwined. Retirees are the group least likely to be in poverty. Not because the single weekly rate of $374 after tax is a lot of money, but because many own mortgage-free homes. Declining home ownership presents a major problem not only later in life but now. Young people find it difficult to save without the discipline of a mortgage.
“When you don’t have a mortgage – and I know because this is what I did: I just bought more shoes, went out for dinner more, drank more expensive wine and went on weekends away – you say to yourself, ‘I’m buggered really. Why don’t I just live for now?’”
The financial sector is missing a trick here too. Maxwell says it should tap this market with some product innovation. “They need to target young people who cannot currently buy and suck them into a sexy savings product. Give it a name. Call it the Not My House But I Want It To Be savings product. Call it what you like, but sell it. Suck that money in. Sit someone down and say, ‘If you had a mortgage, it would be taking this much money out. You don’t have a mortgage, so stick the money over here.’”
ANOTHER AUDACIOUS MOVE
Maxwell has also copped flak from over-65s who believe she should be focusing solely on them rather than younger generations. But she feels she needs to reach out to people early in life and has a pretty audacious move coming. She’s hired staffers from TV3 and TVNZ – the Retirement Commissioner is going to make telly. “We’ve bought equipment and we are going for some NZ on Air funding and we are going to fire up content.” I’m a bit startled when she tells me this, late in our conservation, but she’s adamant that it’s going ahead.
“We have a dry subject. How do we engage? Storytelling is the key,” she says. “I want to commission a van, truck, mobile device, which is going to travel up and down New Zealand. We are going to capture stories from the booth and they are going to be high points with money, low points with money, how poverty makes me feel, how good I feel because I’ve paid the bills.” Initially the videos will go on YouTube but she is looking at documentaries too. “We are going to engage with the right people and we are going to make them.”
She has already made a radical move to pay for this – cancelling the office’s entire TV ad spend. The commission was spending up to $1.8 million a year on TV advertising. After Maxwell joined in June 2013, this was cut to $500,000, and the next year she cut it to zero. TV advertising simply didn’t work. “I’m spending taxpayers money, so whatever I do has to drive behaviour change.”
It was a big call and deeply unpopular with the TV networks, but again she called on her advertising background. “I spent years persuading people as a strategist to buy stuff,” she says. “They might have worn a pair of sunglasses last year and thought they were fantastic. This year you go, ‘Are you kidding me? You are wearing big sunglasses? What, are you insane? Everyone knows they have to be aviators.’ And the next year it will be, ‘What, you’re wearing aviators?’”
She laughs as though these were the actions of another person, but of course they weren’t. In the future, you are still you – that’s the very nature of getting your head around saving for the future. “People really struggle with the very notion of saving for retirement,” she admits. “There’s that old saying that saving for retirement is like donating to a stranger. It’s not. You’re just you.”
She has a little trick that might help, something small you can do while the politicians are doing nothing. “I sometimes play a game with myself where I buy myself a wine in the future. If I am going to spend some money, say, on a bottle of wine, I stop and I think: when I am 70 I am going to drink that bottle of wine on a beach in Fiji. So I put that money aside. And when I am 70, I will raise a glass to my 48-year-old self and say, ‘Thanks for that.’”
‘Don’t beat yourself up’
Women have tended to limit their own ability to save by not chasing senior positions, but Diane Maxwell, mother of a 13-year-old daughter and three-year-old son, is a perfect example of a woman negotiating both the sticky floor and the glass ceiling. “There are always hard calls in being a parent and working, whatever that work is,” she acknowledges.
“When my daughter was young and I was a working single parent, I worried endlessly about whether she got enough of my time and attention. I had a fantastic babysitter who kept reminding me that these were First World worries – and that Jamie slept in a warm bed, in a room full of books, knowing her mum loved her more than anything. As with most of life, there were trade-offs: my work enabled me to buy us a home but I wasn’t always there to kiss her goodnight – looking back, I’m not sure I’d change a thing. At 13, my daughter believes women can do anything and that she can be anything and I’m incredibly proud of her – and she negotiates the market value of her time, which I’ve taught her to do, but now I’m on the wrong end of that negotiation.
“Rule of thumb – don’t beat yourself up, and don’t let anyone else tell you how it ‘should be’. Having a baby at 45 is oddly energising and very grounding. It’s hard to get too full of yourself when you’re lying on the floor fishing toys out from under the couch in your food-covered comfy pants. Things get back to basics very fast.
“I don’t think it’s just about your time, it’s as much about where your energy goes. The risk is that you get home and the person the family gets is the quiet tired person in trackpants, whereas work got the energetic, lively version of yourself. I actively work on that, saving enough of me for home and then agreeing some family commitments are just non-negotiable.
“When our son had some stays in hospital, my partner and I would always tag-team it. I have flown back from Wellington, driven straight to Starship, changed out of my suit into my PJs and bunked down for the night beside my son’s cot. You go from delivering a speech to lying in the dark on a little plastic mattress, listening intently to your child’s breathing.
“It’s an odd but strong mix of work and love and family. I suppose that’s the point, that your children should get all of who you are and know all you can be – whoever, whatever that is.”
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