Peter Dunne says the only way change such as taxing superannuation could be progressed would be through some form of multi-party agreement, but the chances of that occurring are zero

Peter Dunne says the only way change such as taxing superannuation could be progressed would be through some form of multi-party agreement, but the chances of that occurring are zero

By Peter Dunne*

In 1984 when the fourth Labour Government introduced its now infamous tax surcharge of 25 cents in the dollar on additional income above $100 a week for those in receipt of National Superannuation, it was claimed that about only a quarter of superannuitants would be affected – the actual figure turned out to be 23% - and that very, very few of them would lose the equivalent of all their National Superannuation. In the heat of the time, that claim was largely disbelieved as much greater numbers of superannuitants, thinking their retirement income would be more than it actually was,  believed they had been adversely affected and reacted angrily accordingly.

Then, there were just under 400,000 National Superannuitants, accounting for 12% of the population.

National immediately promised to repeal Labour’s surcharge, only to replace it with its own version in 1991.

Superannuitants’ outrage was predictable and immediate, leading not only to the establishment of Greypower but also contributed to the birth of New Zealand First to fight for the abolition of the surcharge. That eventually occurred in 1997, leaving both the Labour and National Parties of the time with massive credibility scars for their handling of the issue over the years.

Since then, universal entitlement to New Zealand Superannuation (as it is now known) has been restored and no major political party has been brave (or foolish) enough to tamper with that. National’s commitment since 2017 to gradually increase the age of entitlement to 67 by 2037 is perhaps the biggest potential move, but it is timid by the standards of Labour’s 1984 and National’s 1991 changes.

Now that the current government has resumed contributions to the so-called Cullen Fund to future proof superannuation payments from 2025, an uneasy consensus appears to reign on superannuation policy.

In the meantime, the raw numbers of those in receipt of New Zealand Superannuation have risen around 95% since 1984 to just under 770,000, and their proportion of the population is up by a third to around 16%.

Perhaps it was that growth and projections that it will increase in the future to around 1,430,000 New Zealand superannuitants by 2050, around 21% of the total projected population then, that has influenced the University of Auckland’s Retirement Policy and Research Centre to call for a tax surcharge on higher income earners receiving superannuation, to cover the cost of their superannuation payments.

Whatever economic and equity considerations there might be in favour of a proposal like this, political reality means it or anything like it is unlikely to fly.

Too many political parties and politicians have been scared by the superannuation experience of the last couple of decades to want to go anywhere what looks like a reintroduction of the discredited approach of the 1980s and 1990s. Even though most of the generation of politicians involved at that time has moved on, the legacy of the sense of betrayal and antagonism engendered by those earlier changes remains.

Importantly, it was often not the superannuitants themselves who felt most aggrieved, but rather those approaching superannuation who saw their potential future income – and thus their intended retirement standard of living – being reduced, and their children, worried about how their parents might cope. It would be just the same today.

The only way change of this type could be progressed at this time would be through some form of multi-party agreement, but the chances of that occurring are zero. For a start, no party would want to be seen to be initiating a move to tax superannuitants more, and few others would be keen to join them.

There was a brief accord between National and Labour before the 1993 election which quickly fell apart because both saw richer pickings in continuing to attack the other over their earlier “treachery and betrayal”. There is no reason to think it would be any different today.

Moreover, if ever there was a cause to revitalise the flagging fortunes of New Zealand First, this would be it, and while Labour, and it appears National too, are prepared to cuddle up to them as the price of gaining political office, neither is so generous as to gift them a whole generation of voters in this way.

The rising numbers of older New Zealanders presents enough of a challenge for both Labour and National anyway, and while both are steadily moving to recapture that ground, neither can afford to alienate, for whatever reason, that group of voters on an issue as basic as superannuation.

Now, while all this might appear an overly cynical assessment, it is nevertheless a political reality. It is not to say, however, that the preservation of vested interests means that future discussions of superannuation policy are off the table, but, rather, that if those discussions are to have credibility, they need to be couched in such a way to gain broad  political support.

Enhancing and promoting Kiwisaver may well a prove a starting point towards some common ground.

Today, over 2,800,000 New Zealanders are enrolled in Kiwisaver and that number is increasing steadily. Making Kiwisaver contributions compulsory for all those in the work force would allow for a more considered approach to be taken to New Zealand Superannuation over time.  Backing that up with an annuities policy whereby Kiwisavers could manage their investment on a regular income stream basis once their funds mature at the age of 65, would mean that the absolute reliance on New Zealand Superannuation as the major retirement income source for so many would steadily reduce over the years, and that the climate for considering its long term future would be more congenial.

There is scope for Labour and National to work together on this ground, if they are of a genuine mind to secure a stable retirement income scene for the future.

New Zealand Superannuation is but one – albeit a very large – part of the retirement income mosaic. The mistake we have made for more than a generation now has been to treat it as the whole picture. It is time to learn from that, and to move forward.


*Peter Dunne is the former leader of UnitedFuture, an ex-Labour Party MP, and a former cabinet minister. This article first ran here and is used with permission.

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You cannot argue with much, or the thrust, of this column. As much as I have always been uneasy about Dr Cullen, you have to give him fair credit for The National Super Fund & Kiwi Saver. At least he did something! The problems that are now emerging starkly were foreseen by the 1972 Kirk Labour government who introduced compulsory super. Muldoon with the dancing cossacks destroyed that. I admit selfishly at the time I voted for Muldoon but I did at least vote for WP’s doomed referendum. A parallel column on this website explains the unsustainability and suggests a tax surcharge. Given all the history as explained by Mr Dunne, surely the next step is for Kiwi Saver to be made compulsory.

It's all easy, looking back, isn't it! I've read opinions that New Zealand would be amongst the richest nations on the planet on a per capita basis if the 1970's superannuation had not got the chop. We'd have been 20 years ahead of Australia with that scheme; a fully self-funded nation. But alas. It was 'better' to give the money to each individual to spend as they saw fit, and we now know 'where they saw fit'?!

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Compulsory! Heck no. Forceably take my cash and hand it over to someone else to play with for maybe 40 years plus! The State is already taking a far greater role in our lives already than is healthy.

Yes it goes against the grain but the Australians have been able to embrace it for their own good. And at least with Kiwi Saver your funds would remain individually in your name with ability to change/select providers at will.

that was the mistake labour made, if it had been set up like kiwisaver than Muldoon would never had won that battle as it would have been seen as taking my money off me.
instead his rational at the time made sense to many,

Not true, look at GV27s comments in the other thread. To him kiwisaver contributuions are a "tax"

Their own good...think again.

“Excessive and unwarranted fees in the super system. ” — Australian’s pay an approximate $30 billion a year in superannuation fees.
“A third of accounts (about 10 million) are unintended multiple accounts. These erode members’ balances by $2.6 billion a year in unnecessary fees and insurance.”
“Not all members get value out of insurance in super. Many see their retirement balances eroded — often by over $50 000 — by duplicate or unsuitable (even ‘zombie’) policies.”

https://medium.com/@_C_Leeson/superannuation-a-disaster-in-wait-ea438ab28b1c

Yep fair enough & taken on board. Though at the end of the day, the question is, despite all the wastage and failings, would the average retiree Australian, and Australia itself in general, still not be better off with the scheme rather than it not being there at all?And totally agree with your comment about the gross inefficiencies and unaccountabilities that inevitably swamp matters when others are managing other people’s money. And that was exactly one of Muldoon’s arguments, and regrettably, on that score he would probably have been right.

We are already far too trusting and reliant on the State. Self responsibility, accountability and purposeful endeavor etc are dying in NZ.

Every time we want something or don't like something or want something done....we ask or blame govt. What a dead end attitude and it's getting worse. We need less govt interference in our lives, not more.

But who is putting their hands up to not receive the pension?

double-dipping.was peter a member of the govt that pushed through the infamous law late at night that gave themselves a gold-plated pension in 1987.I would think that he voted himself a present day income over 123,000 so the national super is beer money for him and if we had an egalitarian society hard to swallow that he should collect it and a winter energy payment as well.

I am amazed at the lack of creativity and intelligence shown by those who would claim to have the solution to this "problem". If indeed it is the problem they are claiming it to be. I have serious doubts about this. Our present system has a hotch potch of different elements. Why do we not look at them as a whole and bring them together as a first class and sustainable solution.

"...Making Kiwisaver contributions compulsory for all those in the work force would allow for a more considered approach to be taken to New Zealand Superannuation over time."
Haha. So much is unsaid in this comment.
We all know what this leads to: means testing of NZ super. Of forced annuity of Kiwisaver draw down.
It is fantastic that contributions are not compulsory. If they were to be compulsory, watch out!!!!
Kiwisaver is not a reliable retirement fund anyway: to be at the mercy of interest rates or the stock market is ridiculous.

Here's a novel idea - the Politicians should have to deal to their own retirement package transparently, before they are allowed to muck with ours!

Seriously though, there would be more to gain politically for the Government to address the issue of Kiwisaver fees, up 13.5% in the last year according to this Stuff article.

And take a look at the fees on passive funds. As a % of the return it's ridiculous.

Wow even super rich superannuitants in this country are seemingly untouchable, even though they didn't save for their retirement, but expected a lower population behind them to pay for them, while they also paid for a much smaller population that was older than them to retire, what a great deal they got.

As New Zealand is a sovereign country with a floating exchange rate it can ALWAYS afford universal superannuation. All these never ending words to say we have a problem when there is NO problem

Really? Given we are a net importer i'm not sure how you come to that conclusion

You have to learn how the monetary system works for a sovereign country which has a floating exchange rate. It is not, and has never been, well not since August 1971, run like a house hold.

I understand how the system works but not sure I understand your link to affordability, care to explain?

She thinks she knows more than she actually does.

Superannuation is not a financial problem for the government. It is a real resources and productivity problem. We need to produce more with fewer workers. So hence the government should be doing everything it can now to stimulate demand and investment in increased productive capacity. So our kids are productive enough to keep us in our old age.

Labour were so scared of the superannuitant vote that they introduced the Winter Energy Payments specifically to placate them.

Basically National's tax cut programme gave superannuitants a chunk of cash back, since the payments after based on the after-tax average wage. Labour were scrapping National's tax cuts to replace them with their Best Start and other family packages, but couldn't risk losing all those grey votes. Hence the Winter Energy Payment which is a direct cash transfer that was slightly more generous than was National's tax cuts would give, so these people would be no worse off under Labour.

Taxing anything ? Nah, nah. Losing move, on the eve of general election.
Instead it is time for helicoptering money. Wise up, Labour, NZ First.

Nice to be reminded of all that stuff. I was around but busy raising family & remember my parents & their friends discussing it vigorously. History always repeats (which is not what the song said) & sure enough, here we are once again. It's a brave government to change the rules on the boomers, just based on shear numbers able to vote. I suppose they'll dismantle democracy shortly as being far too expensive to run & anoint Jacinda as Queen of Aotearoa, much to the UN's delight.

Get yer hand off it Peter. Millionaires are receiving state funded super. You can't justify that when the foodbanks are overwhelmed. Cut the entitlements to the wealthy and lift up the needy.

So the most frightening part of this entire paragraph for me was the line “to cover the cost of their superannuation payments“

Perhaps it was that growth and projections that it will increase in the future to around 1,430,000 New Zealand superannuitants by 2050, around 21% of the total projected population then, that has influenced the University of Auckland’s Retirement Policy and Research Centre to call for a tax surcharge on higher income earners receiving superannuation, to cover the cost of their superannuation payments.