Over at Policy Progress David Choat has written up a few observations on the future affordability of New Zealand Superannuation, based on presentations at the recent Retirement Income Policy and Intergenerational Equity Conference. Choat looks at various projections of the cost of the ‘retirement boom’ and some of the alternative options. He concludes by essentially arguing we have a choice: change our current entitlements or increase taxes to keep them as they are.
That conclusion highlights the folly of the arguments people like Don Brash have been putting forward. Brash argues that current Super entitlements are unaffordable. Fullstop. Brash and his contemporaries in National have spent years arguing that massive tax cuts are affordable and necessary. They’ve conveniently overlooked one of the biggest longterm implications – less money to pay for the baby boomer’s retirement!
I want to see New Zealand Superannuation remain as it is, a universal entitlement from the age of 65. But John Key’s promise to resign rather than cut it looks pretty hollow given his total lack of a plan for how to pay for it. In 10-15 years time when the crunch comes, Key will be off sunning himself in Hawaii while future generations work out how to plug the massive hole he and his crew have left us with.
Depriving us of pension! RRRRRRRRRRRRRR !
!
And where will you be sunning it Chris with your gold plated MPs pension and perks package?
Nobody is taking the pension away spud, I think the real danger in the future is if anyone decides to means test retirement benefits, then we’re all stuffed.
Compulsory super my good man.
‘John Key’s promise to resign rather than cut it’
Surely you mean ‘raise it’? JK has promised not to raise the age of entitlement to National Super. Although In my opinion it is really the only sustainable solution.
It’d be interesting to know roughly how much one would need in personal savings to be able to afford the current pension – i’m thinking along the lines of a voluntary/compulsory Kiwisaver at a higher level. Would make our current system much less of a pyramid scheme, i think.
Key will be off sunning himself in Hawaii while future generations work out how to plug the massive hole he and his crew have left us with.
Was a 4% level of Kiwisaver subsidy (for some) going to fix everything?
It’s a bit rich accusing ‘Key and his crew’ of leaving us with a problem to be solved in the future. To members of the public the ‘crew’ you refer to includes both main parties!
What is Labours position Chris.
If you maintain the eligibilty age will you increase taxes or lower the payment or both?
Mark M has a fair point, how would you fix this Chris? Don’s suggestion didn’t lower the amount of entitlements, just let you choose when to take them in order to keep people in the workforce. The longer they stay in the workforce, the more they receive when they retire, however if they chose to take it earlier, then they would still receive the same amount overall, just less per year. Hardly draconian.
Mark/Oliver – I’ve stated in the post that I think we should keep Super at 66% at 65 years. The real debate is how we pay for that. I’ve made it clear that I don’t know how we pay for it in 10-15 years time, and it would seem the current govt don’t know either.
I don’t know whether you’ll let me put this link through but it’s a number of options that Treasury have put forward to this problem (from around page 53) certainly worth a read.
http://www.treasury.govt.nz/government/longterm/fiscalposition/2009/ltfs-09.pdf
“I’ve made it clear that I don’t know how we pay for it in 10-15 years time, and it would seem the current govt don’t know either.”
I don’t believe you. All parties and most of the general public are well aware of how it it is going to be paid for, it’s just political suicide to discuss it and give the public a position on the hard facts.
Chris to pay for Nat Super there are 3 options.
Keep entitlements as they are and either increase govt income of reallocate govt spending, i.e. take from one pocket and place in pocket 2.
Reduce entitlements be this either the rate 66% or the age of entitlement.
Or make the pension not fiully enclusive i.e Surcharge tax, asset testing etc. But then you would like in 06 be hurting the middle class (Though there may be none as per Clare Currins post !!) as the wealthly will haver diverested ownership to the likes of trusts yet receive 100% of the benefits of ownership).
I am sure that any of these options are not the basis of a winning formula for an election. So we will brush this topic under the carpet bar the opposition at and time to undermine the govt of the day. i.e. Here is a major problem but no solution. Same as could be said as for immigration. The ability for a real indepth debate without the inclusion of 3rd parties as NZ1. And how do you win over the public in a 30sec voice clip, as that is all we have in regard to policies !!! Keep smiling Chris and at least good on you for broaching the topic
StephenR the Cullen fund and kiwisaver were at least in the right direction. National froze the former (contributions) and shrunk the later. They NEED to come up with some proposals.
I note that it is oft forgotten that Australia didnt stave off going into recession because it has “minerals” it stave it off because its government chose a pass of stimulation of the economy, something ours chose not to do.
I listened to Don Brash speak on this, and at one point when asked about an aspect he replied ” I dont know we didnt look at that”. Here he was focused on a possible answer and he hadnt looked at a particular, important aspect. God on him for trying to get it debated.
I still cringe when I see the brethren architects all together (McCully/Joyce/Key) and they all dumped Don Brash cos he was too honest to get them back in.
@Simon 1.24 maybe so, but nobody is funding it adequately at the moment either
@M M – Labour’s plan is what they were doing before the 2008 election
@Chris H – good man!
@Tracey – excellent point
@Chris, I’m am very disapointed by your position on this, as one of the youngest MPs, I as a 27 year old expect you to represent me on youth issues… You fail massively on this…
The US, UK, Aus and I believe Canada, all countries wealthier than us, have indicated movements of the retirement age up to 67 or 68, for a number of reasons; people are living longer, they want to keep internationally competetive tax rates and they recognise the baby boomer population problem… What dream world is Labour and National living in when these countries have made the move and we are still having the debate…
I was in Australia recently (Feb) and they were having a big debate on what a problem it was that when their baby boomers reached retirement they would only have enough in their compulsary super to cover 60% of their total retirement costs, in NZ it is estimated that we will only have only 15% odd saved..! What was Aussie’s response? Mining tax, they give a s**t and are trying to get it sorted out, this difference between us and them means we are going to have massively higher taxes than Aus or have savage cuts to pensioner entitlements, with the 30% wage diffence already and CER free movement, what country do you think young NZers are going to pick if here they have to pay massively higher tax rates to support elderly people than they do accross the ditch, because they had the courage to introduce compulsary super and raise retirement ages..?
Labour made a start in the last government with Kiwisaver and the Cullen but really it is so painfully obvious what we need to do:
- Announce a progressive raising of the retirement age by one year every 5 years up to the age of 70
- Reduce entitlements by 1% every 4 years down to 60% of the average wage
- Immeaditely introduce compulsary super (by making Kiwisaver compulsary at a 4.5% of the average wage employee contribution matched with 4.5% employer contribution, a $1000 yearly government tax credit and a $1000 government start off payment
It is simply a matter of make modest reductions now to ensure we can support elderly people later or face sharp economic decline as Kiwi’s stream accross the ditch to take advantage of better planning…
If you aren’t prepared to do this (and the spineless National Party certainly isn’t) tell me what is to stop me moving to Australia, enjoying the stronger economy, not have to pay the 88% of other people’s retirement that I would here and also raise my future kids in a country where they don’t have to pay for the majority of people’s retirement..?
Very poor, this is not a small problem…
Depending on how old your Ma is Spud she will likely live till her 80s, not to 67 which is what the life expectancy was when Super was introduced, lifetimes are extending (this is good), people are healthier (this is good) there is no reason Super cannot be pushed back and people work longer, it’s all relative…
It’s not a problem of the National Party complaining about poor people breeding, that is a ridiculous argument for a complex problem… If we encourage people to have more children Spud, where are we going to house them, how are we going to pay for Health, Education, Welfare, waste services, sewerage systems, roads, railways, power generation, transmission and distribution, feed them, create jobs and very importantly what will it do to the environment and sustainability..?
I forgot to add Spud, by delaying the age bump ups to one every five years people will not be worse off because compulsary Kiwisaver would have had time to build up an assets base for people – they will be better off…
My Ma is a baby boomer, but due to health she will be lucky to make it to 70. In her 50s at the moment.
I thought there was some kind of problem with people not breeding enough and or delaying it. And infertility on the rise.
I hope we can get around the food thing and stuff
Jeremy M Harris – I don’t disagree with you on the significance of the issue, but I think it’s a bold call for you to say that anyone under a certain age wants to see the retirement age lifted.
It’s true that some of our population are living longer, but not all. Raising the retirement age penalises those who die younger (Maori and PI have shorter life expectancies). It may also be fair to argue an office worker still has plenty of working life left in them at 65 – tell that to a builder with arthritis in their knees.
You’re right, we haven’t done enough. Paul Keating saw this problem coming a long time ago and setup the Australian economy to deal with it. Norm Kirk saw it coming too, but Muldoon threw out his savings scheme in one of the worst election bribes we’ve ever seen.
KiwiSaver and the Cullen fund are a start, but we’ve got to do a lot more. I agree there needs to be a greater sense of urgency around this, which is why I keep raising it (I’ve written several previous posts on this subject).
Surely the first course of action re superannuation is obvious: Make Kiwisaver compulsory.
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This issue surely needs to be raised in the context of framing the discussion so that it drives National to do something about it?
This is a very reactionary government. I can’t wait to see Joyce’s zero limit for all policy as example.
The agreement is that super needs to be raised. Which party is going to do the best job of convincing us it needs to be raised, so that the current govt does something about it?