Changes to Superannuation settings may be needed after 2020, but affordable until then, PM Key says

Changes to Superannuation settings may be needed after 2020, but affordable until then, PM Key says

By Alex Tarrant

Changes to New Zealand’s Superannuation settings may be needed after 2020, although further research is needed before a decision is made, Prime Minister John Key says.

Speaking to media in Parliament Buildings on Tuesday morning, Key stuck to his position that Treasury projections showed Super costs out to 2020 were affordable. However, he accepted the age of eligibility or other settings may need to be looked at after that.

The Organisation for Economic Co-operation and Development (OECD) this morning released a report which said governments with pension ages at 65 needed to consider raising them to 67 to ensure the benefit was available for future generations and affordable as populations aged.

New Zealand’s Retirement Commissioner Diana Crossan has suggested raising the pension age from 65 to 67 by two months a year between 2020 and 2032, a suggestion picked up by the Labour Party as its Superannuation policy. National's support partner, ACT, supports raising the age over a 12 year period, but wants the pension age to start rising before 2020.

Key has promised to resign rather than change the pension age, and noted Crossan’s suggestion was that the age should be raised from 2020, not now, in the face of Labour calling for him to change his stance.

Crossan said on Tuesday morning that any increase in the age needed to be foreshadowed well in advance to allow workers who would be affected by the rise to adequately prepare for it.

Yesterday, the Financial Services Council said tax rates in New Zealand may have to rise 28% over the next 50 years in order to sustain the pension age at 65.

A TV3-Reid Research poll last night showed 63% of voters supported the pension age being raised to 66 or 67. Of these, just over half supported raising the age sooner than 2020, if possible, while nearly half supported a post-2020 policy to raise the pension age. Thirty-seven percent of voters were opposed to raising the pension age.

Fifty-four percent of voters thought Prime Minister John Key should break his promise not to raise the pension age, and agreed he should set new rules now for an increase from 2020. The poll had a margin of error of 3.1%.

Changes "may" need to be made to settings after 2020, although that would be subject to "further analysis," Key said on Tuesday morning in Parliament Buildings.

In response to this morning's OECD report, Key said the different countries referred to all had different Superannuation systems, like in Australia where it was a largely private system.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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I want to hear the alternatives to National Super.  Because a plan is needed and it needs to be a strong one.  Any change to National Super is only going to go one way, and not to make it more generous.  There are some good alternatives.  How come those don't enter the discussion

You should place these good alternatives here into the discussion.

Sure Ralph.  Done the suggestions several times.  But here we go again.
Fully prefunded super.  eg.  Kiwisaver or similar at 15%.  Compulsory and universal.  Including  beneficiaries and the self employed.  With only a minimal hard to get benefit for the very few truely indigient.
As the results of that phase in over say 50 years.  Govern Funded Superannuation can be phased out over say 30 years.
That means pain in the paypacket now for most.  But thats the reality. 
When discussion is limited to raising the age of NS, currently the approach of the politicians, and the media, it is just does not practical.  We need to deal with NS.  But because us individuals are around for up to 100 years.  We need to have policy that is projected out decades, far enough for us each to know where we are going. 

Oh super ideas KH...but hang on a bit...what about all the people who have no earnings during most of their lifetime!...how do they factor into your 15% tax..oops sorry kiwisaver payments...
"including the beneficiaries" you say...but isn't that other people's money 'they' (the govt) would be paying in as a kwiwsaver tax..oops sorry again...kiwisaver payment!
"With only a minimal hard to get benefit for the very few truely indigient."....what "minimum"...and who decides what "truely indigient" would be?
"Pain in the paypacket"...apart from the "truely indigient" since they receive a benefit not "pay" and by now we have forgotten all about the many who are not on a benefit and who do not work during most of their lifetime!!!!
Do you begin to understand KH?.....your ideas look great...for a minute....then the cost of the bureaucracy needed to manage your ideas emerges like a big deep pothole in the highway to NS reform.
And as if the above were not enough...what about the rules relating to immigrants...ten years here and hey presto a full benefit...what about them.
And what about criminals who are in jail for most of the years between 15 and 65....are they to get your NS?
 
 

In other words:
 
DonKeeeee : I know I should do something.  I'll pull out the "Further Research" card so it looks like I'm aware that things might be going pear shaped. But by the time the "Further Research"  is in, I'll be retired to Hawaii.....WooHoo... Now maybe they will stop asking me about raising the super age."

one change that needs to come in pronto is that if you work you don;t get it.
that will have a 2 pronged result.
if you give up work then somebody on the dole may be able to come off it by working.and you will recieve super .
eazi peazi

Penalise people for working, yes that'll certainly help to get the economy moving. 

No it isnt....
define work....for say a PAYE its easy right?
define what a PI does....
How do you tell the difference?  ie for a PAYE you just reduced their income yet they pay a lot of tax and could actually be producing a good and I'd hope a profit for their employer....a PI isnt working? in which case gets the OAP and zero CGT so presumably a tax free income....?
Or what if I retire and become a PI? Im still working...ie earning money....
Someone on the dole can do a skilled PAYE's job? get real. If they were say any decent in IT they wouldnt be on the dole......so at best you just took an unskilled worker at 65 and sacked them and all they get is OAP and employed a younger unskilled worker.......what has been gained?  save on DPB, pay out on OAP.....maybe a NET difference.....
regards

I love the smell of incipient u-turns in the morning.
 
All we need is the Wagner over the PA and the wokka-wokka sounds.  I'm sure your technical gurus can oblige, BH.
 
You Know you Want to....

Speech 1:  Not at any time, not ever.
 
Speech 2: Maybe in the future, if conditions change.
 
Speech 3   Well it was obviously unsustainable from day one.........
 
Politicians. Gotta love 'em.

Easy to blame the politicians but within ten posts Ivan is already being emotive and accusing someone of being a fat cat, whatever that is supposed to mean.  Super changes are a powder keg of emotion - and it's not the Prime Ministers emotions that will explode.

Ralph, she (Diana Crossan) is a fat-cat along with others if she is eligble to get a bullet proof pension from the Government Superannuation Fund - this largesse doled out to senior civil servants etc and lower minions in times past is basically unfunded given the liabilities it is responsible for.
 
The day the government halts this scheme I will, then and only then, take the problems of unsustainable superannuation costs seriously.  

Other than the Cullen Fund all New Zealand super has been unfunded since we first started it in 1898 so government pensions hardly seems worthy of such a derogatory label such as "fat cat".

They are when the recipients are on salaries three times the level of their US counterpart. The RBNZ Governor comes to mind, along with more than a few others if you wish to check.

You keep moving.
So the unfunded part is a red herring then and what you are really against is high salaries; apparently specifically in comparison with US salaries.  Although you don't quote the salary of Diana Crossan's US counterpart.
At any rate, it's intellectually lazy to approach an issue by throwing derogatory labels at others.

There are now 15000 people contributing to this scheme and it has been shut off to new entrants. Currently 65,000 are receiving. Actually the Government has effected halted this scheme as you can now not enter for most PS occupations. Yes it is a gold plated scheme even a teacher will end up with 80% of their average final five years salary. That is equivalent to a few million in alternative investments at current ROR if you retired today.
I like to see it as a reward for good public service... you effectively do  pay income tax in your working life..then it effectively is all paid back and more in retirement...only seems fair for public service....(sarc.)
 
 

Already the 'net' Super is after the marginal tax rate paid. However, why not double the marginal tax on any Super  payment. Those who are very well off would end up paying pack as tax 60% of their gross  rather than the 30% as now.
They can still choose to work if they wish to get less for it.

Key couldn't possibly do something that needs to be done, if it might make him unpopular.

Any politician can do the unpopular.  But only once.

John Key said yesterday in an interview on morning TV --that NZ spends approx 4% of GDP on Superannuation. Other European Countries spend considerably more ---two countries were spending 12% of GDP on Superannuation.  So we have a long way to go to get to their level of spending and we have the Cullen Fund as an extra softener.
I am especially sympathetic to the Heavy/hard physically workers who are not in good enough condition to work to 67 or 70years. I am also sympathetic to the maori people that are shown to die early and make little demand on the Superannuation Funds.
The point is the each of us that are working and paying taxes has put into the Government Funds as we go through life.  The Government has had the use of this money, from all of us over this time, so theoretically there should be enough money set aside for each and every one of us.  But the reality or it is that our Government uses this money for the countries purposes for all sorts of things.  Some wasted some not.  Very seldom has a previous Government deliberately set aside money into an Investment such as the Cullen Fund for Superannuation.!!
Maybe the Answer is to set up a Special--Superannauation Govt Dept--that handles only Superannuation Money--as taken from Taxes at say 6% of GDP and then Money is Loaned out the Government as required at Commercial Rates---and money is Invested Overseas as available.
Lastly I would like you all to NOTE WELL that the new incoming French Prime Minister during their recent Election, had a stated Policy was that he would reduce the Superann Retirement Age to 61 years --- and he has done this within 2 weeks of moving into Government !!!!!!!

Sorry I was wrong -- France has reduced its Retirement age back to 60years if you started work at 18years.  
They also see an offset in this --they have a high unemployment rate and believe this will bring more people into work at the bottom.

A proposition for which there is no empirical evidence at all.

Instead of raising taxes why not encourage more companies to develop our resources.
With a tax rate of 30% this could feed a lot of mony into Government coffers.
Some ideas.
The Oil Industry: There are some Canadian companies here who are finding lots of oil and say that NZ reminds them of North America 50 years ago. ie there is lots of room for them to grow as the industry is so under developed.
Aquaculture: A former ceo of fonterra(Andrew Ferrier) has compared Aquaculture to the Dairy industry and has said that it should aspire to grow to be a lot bigger than $1 billion in annual turnover.
http://www.stuff.co.nz/nelson-mail/features/primary-focus/5968704/Ferrier-worlds-your-oyster
Forrestry: NZ has a wall of wood coming. Create deals with China to process the wood here before it gets shipped oveaseas
 
Steel: There is almost an infinite amount of low cost iron ore off the west coast of NZ that could be used to create steel slabs. Someone from the Labour party(David Cunliffe) has suggested developing this industry.  
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10767100 
 
The problem is that there is an anti resource agenda in NZ which slows everything down. Developing Resouces often turns into an unnecessary battle. 

Just because people are living longer, doesn't mean that they are less worn out at 65, than they would be if our life expectancy was less. A 65 year old is still a 65 year old, and can be just as worn out as a 65 year old 20 years ago. 

True, although there are a lot of 65 year olds who have had less physically demanding lives than people in the past.
 
If anything they should adjust the age of eligibility taking into account the expected lifespan of the population at the time. Not perfect, but an improvement on picking an arbitrary number and just sticking with it.

It goes to show that Key lives for the here-and-now, rather than seeing 10 years ahead.

Forget about the government providing your pension, were better off doing it ourselves, I'd rather pay less tax and have nothing from the government in my old age. There is one thing we can be certain about in guessing what the future will bring and thats,if the government and bureaucrates having anything to do with providing pensions it will be a disaster.
You can already see a disaster on the horizon, treasuray forecasts for 4% GDP growth in the next 3 or 4 years is impossible as with that sort of growth rate the acompanying rise interest rates on the debt will likely double and collapse the system, not only in NZ but across the globe. http://j.mp/L32BnJ

The problem with your approach, Rob, is that many people less responsible than yourself would see a system of "less tax now and nothing from the Government later" as an opportunity to spend it all now on the basis that the Government will have no choice but to rescue them later.  It is simply not credible for the Government to say that such people will be told "well you should have saved up while you had the chance" and left to starve to death on the streets.
 
Government and bureaucrats have quite a lot to do with providing pensions now and it's not a disaster, on the contrary New Zealand has one of the cheapest and most effective pension systems in the developed world.

Interesting debate. However, it's all a bit of a red herring. 
When a universal basic income is introduced, superannuation, like welfare, will completely disappear. The concept of superannuation, like many 20th century policies, is outdated and unworkable. 
It's time to move on and start looking at policies, which might actually have relevance fo the future and not the past. 

The problem is to give a safety net to all but also to encourage people to save extra for themselves.
 
The current super is very generous by international standards. I would suggest setting the level of payout at just above poverty level and making it applicable to all. Anyone wanting more income in retirement has to save for themselves or, ideally, be forced to save a % of income into Kiwisaver.
 
For this to work, the government must set the Kiwisaver rules in stone so people have confidence that it will not be timkered with when the government wants some more money.
 
As it stands, I pay the minimum into Kiwisaver and the rest into personal investments which I know I can access at any age.

What are you talking about? 
 
The current NZS is just above poverty level.  It's generous by international standards only if you measure it as a proportion of pre-retirement income to the lowest-income people.  It's extremely mean as a proportion of pre-retirement income for high-income people.
 
Anyone wanting more income in retirement does have to save for themselves  (or keep working).   Why would it be "ideal" for them to be "forced" to save a % of income into KiwiSaver? 
 
 

...... a study of the life & writings of St. Francis of Assisi is a boon to any who look to a life of positive " poverty " ..... not the harsh grinding poverty of starvation and want , but the poverty of eschewing money in favour of the pleasures nature offers for free ....

Giovanni was a bloody hippie...and a beggar to boot....n that whole Brothers n Sisters of Pennance had a disturbingly communistic ring to it .......wasn't he Saint to the Environment.... see ..! bloody hippie.