What Employee Benefits Each Generation Wants

Different generations of workers (often) want other things. As each generation is in a different stage of their lives, it’s no surprise that they tend to appreciate different types of employee benefits. After all, young Millennial parents have other priorities than a close-to-retirement Baby Boomer.
The Benify study separates employee benefits into categories that employees find most important and those they most appreciate. Let’s see what the overview looks like per generation.

Most important benefits among the different generations in the workplace. Image source: The Employee Happiness Index 2019

Two things immediately stand out when we look at what benefits people find important.

The first and perhaps the most obvious one is that pension plans gain importance as the generation gets older. This makes sense as graduates who just entered the workforce probably won’t be thinking about their retirement in 40+ years.
The second thing worth noticing here is skills development. Unsurprisingly, the development of new skills is more important for younger generations, as they will be more affected by technological developments than for Baby Boomers.
Regardless of their age, something that tops almost every employee’s list is working hours and leave.

Most appreciated benefits among the different generations in the workplace. Image source: The Employee Happiness Index 2019

When we look at the benefits employees most appreciate, the top 5 per generation look slightly different. Suddenly, things like food & beverage and mobility pop up on various lists. However, the number one among pretty much every generation is health & wellness.

It’s interesting to see that financial wellness is something that the youngest generation in the workforce, Generation Z, has in its top five. As companies will increasingly hire people from Generation Z, financial wellness will probably become a more important employee benefit.

Benify, Employee Happiness Index 2019. Click here to read more

How the New Superannuation Bill affects UK Expats

This article discusses how NZ Superannuation entitlements may be impacted for ex UK migrants following the enactment of The New Zealand Superannuation and Retirement Income (Fair Residency) Amendment Bill. The article does not consider migrants from Countries other than the UK or those that have lived outside the UK.

Dia Eveleigh, Head of Wealth Management, First Capital Financial Services

New Zealand Superannuation Amendment Bill

The New Zealand Superannuation and Retirement Income (Fair Residency) Amendment Bill has passed its third and final reading in Parliament and is due to become law once Royal Assent is given. The Bill will see the qualifying period for New Zealand Superannuation rise from 10 to 20 years, with a phase-in period starting from 2023.

What is the current criteria?
The Work and Income website states that you may qualify for NZ Super if you:
a) Are over age 65
b) Are a NZ citizen, a permanent resident, or hold a residence class visa
c) Are ordinarily resident in NZ when you apply
d) Have lived in NZ for at least ten years since you turned 20
e) Have lived in NZ for at least five years since you turned 50

The Work and Income website also states, “You may qualify for NZ Super with less than ten years residence if you have migrated to NZ from a Country that NZ has a social security agreement with.”

What does the amendment change?
The amendment means that point d) above will change from 10 years to 20 qualifying years. The new law covers all residents, including born New Zealanders, meaning those who spend significant time overseas could be affected by the law change.
Those born before the 30th of June 1959 will qualify under the current criteria. A phased lifting of the qualifying period applies if born between the 1st of July 1959 and the 1st of July 1977. Applicants born after the 1st of July 1977 are subject to the full 20-year qualifying period.
All other points remain unchanged.

Social Security Agreement with the United Kingdom
New Zealand and the United Kingdom have a social security agreement that covers Superannuation payments; this has not changed. For ex-UK migrants or returning New Zealanders that have lived in the UK, this is important. Article 10 of The Social Welfare (Reciprocity with the United Kingdom) Order 1990 states:
“ … a person who is usually resident in New Zealand shall be treated as if he had been resident there during any period when he was resident in the United Kingdom…”
In other words, time spent as a resident in the UK counts as time spent as a resident in NZ. This is most vital when considering the number of qualifying years required to meet the criteria for New Zealand Superannuation.

An example.
Jane was born on the 2nd of July 1977 and will be 65 in 2042. Jane was living in the United Kingdom between the age of 21 and 63 before migrating to New Zealand with a Permanent Resident Visa. Jane remained living in NZ until the age of 65, at which time she applied for NZ Superannuation. Jane must meet the criteria for NZ Super, including:
i) 20 qualifying years between age 20 and age 65
ii) 5 qualifying years between age 50 and age 65
Jane meets the criteria for NZ Superannuation due to the Social Security Agreement between NZ and the UK. Jane has 42 qualifying years between the age of 21 and 63. Jane meets the “5 years since the age of 50” criteria under Article 10 of the Social Security Agreement by virtue of residence in the United Kingdom.

Potential Issues?
For ex-UK migrants that have lived in the UK for the majority of their life, the Amendment Bill will have little to no effect. However, as the workforce has become more transitionary in recent years, ex-pats who have worked offshore may need to look at their circumstances.

What about my National Insurance payments?

National Insurance payments are required to qualify for a UK State Pension; however, the existence or non-existence of UK National Insurance payments has no bearing on qualifying for NZ Superannuation. This subject is best explained in our e-book titled “State Pension: NZ vs UK” and is available at https://www.firstcapital.co.nz/_files/ugd/d96144_00bddae920b14c349e0e8bd45310223a.pdf.

UK Private Pensions
A UK Private Pension has no impact on qualifying for NZ Super. The rules regarding the transfer of UK Private Pensions are complex and constantly changing. We recommend contacting us to discuss the advantages and disadvantages of transferring UK Private Pensions before making any decisions.

Dai Eveleigh
First Capital Financial Services


Refer to Article 10 of The Social Welfare (Reciprocity with the United Kingdom) Order 1990, Schedule: Convention on Social Security between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of New Zealand


Article 10 is titled “New Zealand National Superannuation by virtue of residence in the United Kingdom”. Article 10 is in The Social Welfare (Reciprocity with the United Kingdom) Order 1990

New Zealand Superannuation and Retirement Income (Fair Residency) Amendment Bill

Work and Income website:

First thoughts on Full Licensing

“For us, it was mostly about crystalising some of our existing business procedural practices. Once we were satisfied that we could meet the requirements in a way that we could be proud of, we pushed the submit button.”

Hugh Percy, Managing Director, First Capital Financial Services

First Capital was the 100th application to receive their Financial Advice Provider Full (FAP) License.

Under the new financial advice regime, set out in the Financial Services Legislation Amendment Act 2019, all providers of regulated financial advice to retail clients will need a FAP license.  The new rules require financial advisers to meet specific competency standards and abide by a new code of professional conduct.

Hugh Percy spoke to Anita Frazer, FMA’s Head of Compliance Service, and discussed First Capital’s journey through their successful application process.

To read the full story click here

To learn more about a Financial Advice Provider (FAP) click here

Investment Risk and Returns

Like my Grandfather used to say, “The higher the return, the higher the risk”. However many investors tend to focus on finding the investment with the highest return rather than appropriately weighing up risks. So what is risk?.

For investors, risk is the chance that an investment’s actual return will be different than expected. It could include the loss of some or all capital, a lower than expected rate of return, or a lower than expected income. Conversely, it could also include a higher than expected return, although most investors see this as ‘skilled’ investment selection. “In the investment world, the rear-view mirror is always clearer than the windshield.”

According to Modern Portfolio Theory, a strategy that carefully chooses different investments that work together in order to achieve a stated outcome, returns are relative to the amount of risk you are willing to take. Investors that are, in the short term, willing and able to accept variance in annual returns as well as variance in capital are able to gain higher returns in the long run.

So why doesn’t everyone just invest in investments with the highest volatility and therefore the highest return? The first reason is that not all investors can emotionally withstand higher volatility, to see capital move up or down by 10% can be quite distressing for some investors, especially retirees who rely on investment income to provide for living expenses. The second reason is practicality. For example, if the funds have been earmarked for a house purchase, security of capital is far more important than achieving a higher potential return.

There are a number of strategies investors can employ to reduce investment risk. One of the most common methods is Diversification. This means spreading investment capital across a range of investments as well as different asset classes including shares, property and interest type investments. My Grandfather referred to this as “not putting all your eggs in one basket”.

There are many resources available online which investors can utilise to help make investment decisions. The Government funded www.sorted.org.nz is a good place to start and includes a handy nine question quiz which helps determine how much volatility can be tolerated. The website also recommends researching, comparing and contrasting everything, which reminds me of one last piece of my Grandfathers advice; “If it’s too good to be true …”.

The views in this article are of a general nature only and should not be considered personalized advice. A disclosure statement is available and free of charge.

Investing in Bonds 101

Almost everyone in New Zealand will have heard of bonds, and indeed most New Zealanders are likely to hold an investment in bonds either in private investment portfolios or through their KiwiSaver retirement plans. Bonds are considered one of the four major asset classes along with shares, property and cash, yet are the least understood investment sector.

So what are bonds? Bonds are basically IOUs issued by governments, companies, banks and even international institutions, such as the International Monetary Fund. The investor becomes the creditor while the borrower becomes the debtor. There is a principle component which is repaid at maturity but the investor also receives interest payments, called coupons. Bonds have an intimate relationship with interest rates in that when interest rates fall, bond prices increase and vice versa. The overall return on a bond, referred to as the ‘yield’, is essentially a function of current interest rates plus an extra return for bearing the risk, with bond holders of riskier companies generally expecting to receive a higher return. Government backed bonds generally have lower yields than corporate bonds as it is very unlikely that a Government will default on the repayment of capital at maturity.

Bond investing involves a number of risks therefore it is important to weigh up the advantages and disadvantages which may include interest rate risks, default risk, inflation risk, liquidity risk and early encashment risk. To manage such risks, many investors choose to invest in bonds though a professionally managed fund. Professional fund managers will buy and sell suitable bonds in order to produce returns that meet the objectives of that particular fund. They will often have access to bonds which are not available to the general investing public or will spot differences in market pricing and act on those differences in order to produce returns for their investors.

When a new bond is issued, a Product Disclosure Statement (PDS) must be produced. Recent new laws now require a PDS to be in clear language so that investors can make informed decisions, and must include essential information such as what the financial product is, information about the organisation offering the product, key terms and key risks affecting the investment. Credit ratings services such as Moodys, Fitch or Standard & Poors may give ratings to bond issues, which helps identify the quality of a particular bond. For investors looking for further guidance, The Financial Markets Authority website contains information on this and many other investment topics; www.fma.govt.nz/consumers If in doubt, seek the advice of an Authorised Financial Adviser who is qualified and experienced in this area of financial advice.

The views in this article are of a general nature only and should not be considered personalized advice. A disclosure statement is available and free of charge.

Updates to your KiwiSaver

From 1 April 2019, the New Zealand Government have introduced changes to KiwiSaver which offer greater flexibility to tailor your KiwiSaver account to suit your needs.

Here’s what you need to know and how this can work for you:

From 1 April 2019

  • New rates

Two new contribution rates have been added for members, 6% and 10%. Members now have five contribution options to choose from – 3%, 4%, 6%, 8% & 10%.

How can it work for you: Time to review your current contribution rate? Are you stuck on the default 3% and never considered other options? Have your circumstances changed? Wanting to save more for your first home? Could you be saving that little bit extra for retirement? Consider your contribution rate and make it work for you and your goals.

  • Contribution ‘Holiday’

Let’s face it, it’s not a holiday so why call it one. The contributions Holiday will now be known as Savings Suspension. The Contributions Holiday allowed members to temporarily suspend contributions to their KiwiSaver account for a specific period of time. Under the Savings Suspension, members can still elect to suspend contributions as required, but going forward this will be limited to a maximum period of one year, before you need to renew it.

How can it work for you:Essentially this is just a name change but we need to change the way we think of it too. We need to think of this as a suspension of our savings, rather than a relaxing holiday. By introducing a maximum suspension period, this also ensures that members are reviewing KiwiSaver accounts regularly and making the most of their saving years.

  • Government Contribution

Until now the annual contribution made by the Government has been known as the ‘Member Tax Credit (MTC)’. This will now be known as the ‘Government Contribution’.

How can it work for you:The change of name does not impact your KiwiSaver account. If you are eligible to receive the Government Contribution, then this will continue as normal. Make sure you are making the most of the KiwiSaver benefits by checking your current contribution amount to ensure you are eligible to receive the annual Government Contribution of up to $521.43 per year.

What’s coming up?

From 1 July 2019

  • Opening the doors…

From 1 July, KiwiSaver will be open to all ages – people 65 and over will now be eligible to join KiwiSaver. Now’s your chance to enroll in your desired KiwiSaver scheme. This can be included as part of your overall retirement planning or just a back up for a rainy day.

  • …and throwing away the key

Current KiwiSaver rules state that a member who enrolls in KiwiSaver between the ages of 60 to 64 (inclusive) are locked in to their KiwiSaver scheme for five years.

From 1 July, new members will no longer be locked in to the scheme and able to withdraw their KiwiSaver funds at age 65.

From 1 April 2020

KiwiSaver members who are impacted by the 5-year lock in period (i.e. a member who enrolled before 1 July 2019, and aged between 60 and 64 inclusive when they enrolled) can elect to opt out of the lock in period any time after they reach the age of eligibility for NZ Super.

Remember, if you choose to opt out you will no longer be eligible for compulsory employer contributions or the government contribution. Please consider this when making your decision.

For further information on KiwiSaver and how these changes may affect you, head to the KiwiSaver website, or get in touch with an adviser from First Capital to discuss.

Falling in love with volatility

We recently came across an article by investment heavyweights, Vanguard, that raised some interesting points around market volatility. The article demonstrates ways that we can learn to love market swings, and that volatility might not actually be as bad as we think.

Whilst the article refers to American investment options (401k, Roth, IRA), the values remain the same –

set financial goals, keep track of those goals, learn from your mistakes, switch off the media buzz and lastly, talk it through with your trusted adviser.

Read more…

If you have any questions or if you want to have a chat with us about your future planning, please get in touch. We are here to help.

Coronavirus & the investment markets

We expect you are noticing the media headlines regarding Coronavirus and the higher levels of investment volatility. We want to reassure you that we continue to actively monitor your investments closely.

After a strong 12 months for investment markets, February has seen a reversal in confidence due to the Novel Coronavirus outbreak, a more contagious virus than SARS (2002) and MERS (2012). The issue for consideration is the impact on the global economy and the influence of China which is now far larger than it was in 2002 when SARS occurred. Using SARS and MERS as a benchmark in history, it is expected that markets will typically rally once the number of new cases peak. Until that stage, we do expect investment markets will be somewhat volatile. Some commentators suggest a 6 to 8 month period between initial outbreak and peak cases, suggesting July or August.

The advantage of a diversified investment portfolio is the range of holdings across different sectors and regions. A key strategy of investing is to include local and international shares, property & infrastructure as well as interest generating investments to position your portfolio for both the good times and times of volatility. We have been discussing with the fund managers and their current views on markets, and can confirm that the active managers are taking a safety first approach, banking profits, and holding a greater percentage of cash. We expect managers will wait for signs of an improving market before deploying cash as new opportunities arise.

Whilst there is uncertainty in the short term, we believe that in the long term it is likely that global economic growth will continue, supported by low interest rates and by governments poised to respond.

The views in this article are of a general nature only and should not be considered

personalised advice. A disclosure statement is available and free of charge.

Time in the markets – not market timing

Market corrections are not uncommon and should not be unnerving. However, when investors see the value of their investments dwindling, their aversion to losses can compel them to sell. And once they have sold, they stay out of the market.”

Capital Group have produced a guide that demonstrates the importance of long-term investing and that time in the markets is key element to surviving a market downturn. Investors who leave the market at the wrong time may risk losing out on price appreciation.

Read the full guide here

Credit: Capital Group

The views and opinions expressed in this article are of the author and are not necessarily those of First Capital Financial Services. The information in this article is of a general nature only and should not be considered personalised advice.

A disclosure statement is available and free of charge.

What’s your investing style?

With share markets at all-time highs it’s a question of, how long can this go on for? When will a crash occur? When will prices drop? When should I invest – when the market crashes and stocks are cheap?

The ability to time the market can be a tricky exercise. It requires expertise and waiting for the opportune moment, but in most cases can lead to poor investment decisions or missing beneficial investment time altogether. This strategy is often known as a losing strategy as there is no guarantee that you will ever ‘time’ the market right. So, what method should we use?

There are two investing methods to explore: Lump-sum investing and dollar-cost averaging.

Lump sum investing is an all-in approach of investing one lump sum into the market. History shows that the market climbs more often than it falls and with this theory, lump sum investing provides instant exposure and should increase over time.

Dollar cost averaging is the little and often approach. This method means that the investor invests the same amount of money at a set frequency, weekly, fortnightly, monthly etc. If you think of how a KiwiSaver account is operated and where contributions are generally made on a regular basis – this is the same method. If the market has a downturn, this method means that more shares can be purchased at a lower cost. This method can also introduce investor discipline and prevents the investor from attempting to time the market because you’re buying all the time.

As an example, two investors decide to invest $10,000 each in one company. The first invests as a lump-sum in one go, the other invests the same amount in five monthly amounts of $2,000. In the five months, the share prices fluctuate – here’s what would happen to the investment:

In this example, person B ends up ahead. By investing a fixed dollar amount in the fund every month, Person B bought more shares when the price was low, less shares when the price was high, and ended up with more shares after five months, at a lower cost per share.

Which method is the best option for you? Whether you prefer to time the market, invest in lump sums or spend little and often, the method most appropriate largely depends on your investment timeframe, your goals or objectives and if you are looking to maximise returns or reduce risk.

Investing in lump sums can be ideal for shorter timeframes and may maximise returns however, can come at a higher risk. Dollar cost averaging offers a disciplined approach while reducing the risk of investing at market peaks. Every investor is different and what suits one may not suit others, so what is your style, all-in, or little and often? Or perhaps you are prepared to apply both methods and make the most of every situation.

The views in this article are of a general nature only and should not be considered

personalised advice. A disclosure statement is available and free of charge.