Treasury boss Gabriel Makhlouf says the age of superannuation entitlement ‘probably should increase’ to help manage what an economist calls NZ’s ‘looming fiscal time-bomb’

By Jason Walls

The Treasury is recommending the age of superannuation entitlement be increased to help New Zealand prepare for the economic challenges of an ageing population.

This is despite Prime Minister Jacinda Ardern saying she would resign before increasing the retirement age.

Speaking to Interest.co.nz, Treasury Secretary Gabriel Makhlouf says he would “recommend that we change the age of superannuation in the long-term,” to prepare people for the changing demographics.

New Zealand’s changing age structure in the next 15 years will see a significant shift in the ratio between those aged 15-64 and those aged 65 and over.

Economists say this will put much more strain on the public purse strings – ANZ’s chief economist Sharon Zollner calls this a “looming fiscal time-bomb.”

Spending on health is expected to rise from just over 6% of GDP in 2015 to almost 10% by 2060, according to Treasury’s most recent report on New Zealand’s long-term fiscal position.

Superannuation spending, which is 5% of GDP at the moment, is projected to jump to almost 8% by 2060.

“This isn’t a question of economic theory. It’s a question of maths,” Zollner says.

All up, the Treasury’s report expects Government debt as a proportion of GDP will balloon to more than 200% by 2060, in large part due to the ageing population.

That’s up from 21.4% now – as a dollar amount, it is estimated the Government will owe roughly $3 trillion in just over 40 years’ time.

But Makhlouf says it is very unlikely a scenario where debt levels reach 200% of GDP will ever play out.

“Those are projections and they're assuming that Government policies essentially don't change.

“They assume that the growth in spending just continues over the horizon.”

Michael Littlewood, former co-director of Auckland University’s Retirement Policy and Research Centre, agrees.

“The Treasury’s report was done for one reason, and that was to alarm people into saying we have to address the superannuation issue.”

Both Littlewood and Makhlouf say the onus is on this, and successive Governments, to make changes to ensure debt does not get to that level.

Age of super ‘probably should increase’

Makhlouf says the Government’s approach to debt and spending, through its budget responsibility rules, have already started to help.

But there are other factors to consider, such as the age of superannuation, currently 65 years old.

“The age of superannuation probably should increase,” he says.

“Since it was set, longevity has changed, and people are increasingly working past 65. We think it’s one of the changes that Government could make.”

But this won’t happen under this Labour-led Government.

In an election debate, Ardern said she would resign before raising the retirement age.

Former Prime Minister Bill English said he would increase the age of eligibility to 67 by 2040 – a policy Ardern’s Government scrapped.

Makhlouf says the change does not need to happen rapidly. Ultimately, he says it’s about choices and what the Government decides to do in a bid to make sure it does what it can to ensure the future fiscal burden is limited.

“We don't need to make quick decisions today to manage where we may be in 40 years’ time.”

Can’t keep ‘kicking the can down the road’

But Bagrie Economics chief economist Cameron Bagrie disagrees.

“The longer we wait to make some hard decisions, the tougher those decisions are going to be.”

He says the time is now to be having a debate around how to manage New Zealand’s future cost burdens.

“We can't just keep on saying she'll be right because it's not going to be right.”

Raising the retirement age, he argues, won’t make enough difference to prevent the Government being burdened with billions, perhaps trillions, of dollars’ worth of debt in the future.

He suggests looking into whether superannuation needs to be means tested.

Bagrie is critical of the Government for not doing enough to solve New Zealand’s long-term fiscal issues.

On the one hand, he says, there is a strong intergenerational aspect to the work Ardern and her Ministers are doing.

Think measures to address climate change, through ending offshore oil exploration, as well as the way the Government is trying to get more young people into houses through KiwiBuild.

But when it comes to arguably the biggest problem facing New Zealand’s long-term economy, he says the Government is just “kicking the can down the road.”

A spokesman for Finance Minister Grant Robertson says the Government has restarted contributions to the NZ Superfund to help prepare the country for the challenges of an ageing population. 

National did not contribute to the fund during its time in power.

The Government's commitment to the Budget responsibility rules – getting net Core Crown debt to 20% of GDP by 2022 and to keep Core Crown Spending at roughly 30% – will also work to mitigate this future economic risk, the spokesman says.

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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133 Comments

Isn’t Super age already on track to rise to 67 soon?
Or is Labour reversing that?
Not sure that this Treasury person really identifies with real NZ and authentic NZers.

The article states

"Former Prime Minister Bill English said he would increase the age of eligibility to 67 by 2040 – a policy Ardern’s Government scrapped"

As for your "identifying with real NZ" comment. I feel I should point out that your doctor doesn't need to be you sole-mate to identify that you are dying of a terminal illness.

My boomer parents will empty out the super piggy bank, go on a cruise and sell the house to some foreign students well before before I retire at the age of 79 still paying rent.

This is true.

Hey big pussy, isnt it their money they probably worked to earn so can't they also decide whether to spend it on themselves or bequeath it to their ungrateful son? IMO your parents should hope for their own sakes that euthanasia is not introduced

Well thats rather vulgar.

I don't care what you think and it's not what you have implied, as a sexual reference, Bilbo is being greedy and friggin hopeless

Seems you have sex on the mind.. i was meaning your comment about euthanasia.

I don't care what you think pragmatist, we are at polar opposites in perspective

Thanks, that's quite the compliment.

The point I was making is that Bilbo is being greedy and friggin hopeless. Sounds like he is still young enough to make something of himself instead of making himself a victim

Former Prime Minister Bill English said he would increase the age of eligibility to 67 by 2040 – a policy Ardern’s Government scrapped.

What's an authentic NZer? Someone who wants gst at 50% to pay for super?

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10

Boomer PM proposes raising pension age once boomers are all safely through. Like free education before it, another case of getting for oneself and not passing on to next generations - because it's nice to give yourself a tax cut, eh.

Being realistic, at some point we will definitely need to raise the retirement age as life expectancy increases. It obviously cannot be done in isolation but needs to be alongside other policy changes - e.g. we'll need to ensure we have policies that help people have access to suitable work in their late 60s. And we'll probably need to confront tax policy too.

Pension age was raised to 65 from 60 in the early 90's and the ratio reduced to 60% (from 80%)of the net ordinary time wage. Labour Alliance increased it to 65%.
Boomers were the largest voting cohort, yet they voted themselves an extra 5 years work and a reduced pension over this period.

So they tried and failed to solve the problem, do they want a medal?

That's a fair point. Thanks.

Haha. I was wondering if Bagrie would stick his oar in somewhere on this. He really has a barrow to push doesn't he!
Again we have an article which omits more than half the issues. Like the young actually wanting the retirement age to stay the same. Like the life span in the US actually dropping now. Drugs being one big reason and here in NZ the push to making drug taking legal which of course will make drug use skyrocket. Coupled with the increase availability of fentanyl which China is pushing onto the West.

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Not sure if early 30s still counts as young, but I'd like to see super age increase. Makes sense as life expectancy has increased so dramatically (and continues to do so).

I'm sure you're well aware of this but have somehow chosen not to present it, but here in NZ we are only talking about decriminalising marijuana. The proportion of US drugs deaths caused by marijuana is essentially zero, opioids are the real issue over there. Furthermore, many find marijuana an effective pain medication with a much better side effect profile than the strong opiods causing so many problems, so this change could even help reduce opioid use.

Yeah right

I too agree with mfd

And the experience of Portugal, where legalizing all drugs has led to measurably lower levels of drug use and addiction. The data doesn't back up the dogma

Yes..wait also for all the stress related illness become more mainstream...life expectancy and health trends may well change.

And obesity has yet to hit.

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Sent: 01/06/2018 09:45
From: Labour@Govt.nz
To: National@Govt.nz
Subject: re: Suppression of Evidence Regarding Freedom (SERF)

Hi Bill

Thanks, we are trying our best. As you can see we have had a very productive first 6 months.
We have
- Left immigration completely untouched
- reneged on most of our major promises (Silly peasants never learn)
- Destroyed Oil and Gas
- Raised taxes where possible
- Emptied the prisons
- Created some more labour (Hence our name) intensive roles in the Forestry industry.

We are now looking into the retirement thing. We expect you will continue to pose minimal opposition to our ideas, much as we did to yours.

Cheers
P.P Wily Winnie
Jaz

p.s. That runt dig is why I didn't side with you fellas.

--------------------------------------------------------------------------------------
Sent: 19/10/2017 19:03
From: National@Govt.nz
To: Labour@Govt.nz
Subject: Suppression of Evidence Regarding Freedom (SERF)

Hi Jacinda

Congrats, that Winnie is a cunning wee runt - be careful of that one. Now that you are in power, please ensure you continue the work we started re the continued oppression of the NZ voters (SERF). Our list of achievements include:
- Increased immigration
- Degradation of all major public services
- increased housing costs
- removal of worker rights.

However we feel that this work is not finished. It is imperative, that we, the ruling class ensure that the costs of living a sufficiently high that the serfs are bound in debt for ever, we can then raise the retirement age to ensure they continue working until they eventually die (or we can replace them with more profitable methods)

It is the only way we will survive.

Regards
Bill

Means testing is a much better idea than raising the age.

Why do we pay multi-millionaires welfare just because they are old? Effectively it is a top-up for their children's inheritance.

Welfare should be for those who really need it.

It was means tested originally. It was Labour that took away means testing in the first place.

Means testing is a stupid idea. They will use accountants to hide their wealth and income years in advance and the middle class (who can't afford accountants) will get screwed.

Better to put a land value tax in place and claw some of the money back.

Good point. This is probably a more efficient method - and it's essentially going to draw a contribution from the massive betterment people have received tax-free to this point.

How would a land tax affect leaseholders or would the owners have to pay the land tax?

... the owners of the land pay it ... ... not the leaseholders ....

It's a gem of an idea ... easy and cheap to impose ... pings the rich mostly .... very much so, as the unimproved value of land in this nation has rocketed in recent years ....

.... it's the humungous goldmine which I'm surprised Taxinda and her cronies havn't hooked into ... .. land tax, the gift that keeps giving , in good times and bad ...

..it all comes back to an asset tax. The only tax one cannot wriggle out of as it matters not who owns the asset. The resistance to such a tax is led by the wealthy, but not openly, rather by feeding fodder to the gulllible press and masses so they think it will hurt them.

No exemptions = no loopholes and no work for the tax lawyers/accountants. Watch asset values revert to their ability to pay for themselves. A beatiful tax if one could ever have one.

"No exemptions = no loopholes" - nonsense. Emigration is a giant loophole and will result in massive capital flight.

The beauty of a land tax is you can't take it with you on the plane.

Would never happen. We live in Elysium, haven't you heard?

Only some of us do...

Who do you think pays the majority of tax and therefore super in NZ? To avoid this why not over a long period transition away from super all together and go to KiwiSaver completely. Then this wouldn’t be an issue...

Thats fine for a 30year+ horizon, but what about the next 30 years while the boomers drain the coffers with superannuation and healthcare costs?

An estate tax is one possibility, but that usually just leads to people finding ways around it. Land tax is the easiest and unavoidable option IMO.

Logans Run. Problem Solved.

the Joneses . . . no, no no!
Come on, means testing superannuation will not affect multi-millionaires at all. They would be to far, far too clever to be a position that they would be denied superannuation through means testing. Why do you think they are multi-millionaires in the first place.

The reality is that those that will be most affected by means testing will be the low to average salary earners paying PAYE tax who have never been able to structure income to minimize their tax obligatiojn. It is sad that this group are also often the savers who look to make provision for their old age; why should they be penalised for doing so?
Means testing will just mean that the more affluent will look to ways and means to avoid being hit. Like Prohibition in the States; it wont work and Labour found this out in the 1980s.

Do we currently have a problem with multi-millionaires committing unemployment benefit fraud? Why would it be any different for super?

Nobody stops going into business to make more money because they might have some of it taxed away from them. Likewise people would still save and invest for their retirement as they do not want to live a bare bones lifestyle when they are old.

I am currently getting penalised for having a job by being ineligible for the unemployment benefit. I am OK with that, as I get paid more than them.

If the ineligible were found to be committing fraud by hiding assets they were using to live off then they can be charged just like anyone else. And the risk of that should be enough of a deterrent for those who do not need the extra anyway.

I feel you get scammed a lot but don't know it.

Also its not fraud when you are a multi-millionaire because you pay good money for high paid accountants and tax lawyers make sure its just "tax efficient" not "tax avoidance", Why pay the government 28% when you can pay them 10%?

Besides your holding companies are only directors of the Trusts so none of that money technically "yours" right? How were you to know the corporate tax rate was zero tax in the Caymans, just seem like a nice place park some of the trusts money, all that sun makes money grow faster.

Today's news - the Granny Herald featuring a naughty landlord being sent to jail for benefit fraud: https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12062819

Nice Rick, the timing of that is too funny!

OK you win. We should have a UBI also or else some will cheat the system..

The great thing about the UBI is indeed no one can cheat to get it.

Not sure if that was a serious suggestion but I am 100% all for a properly implemented UBI.

Don't get me wrong its not perfect and there is a lot to work out but I think its better than all the crappy piece meal social welfare that we have currently.

The biggest problem is being able to afford it though

OK, but how does one spend that money on themselves or their dwelling without it being noticed? Surely anyone investigating you would see through that immediately.

I know people dob in their neighbours currently for lifting heavy things when they are on sickness benefit for having a bad back. Who's to say they won't do the same for superannuation fraudsters.

All comes back to whether it is worth it for the individual really, their moral compass and whether they can sleep at night. Super is not a lot to gain, where as some peoples tax bill is worth dodging.

Anyway I still think it is a much better path to look at than increasing age of eligibility.

Super is not a lot to gain? $600/per week for a couple is not a lot? Tell that to half of South Auckland, who would see that as a ~50% payrise.

Really? I literally just explain that.

Lets try again. Because "they" don't have any income they don't pay any tax. As you said that it the real benefit.

But since "they" don't technically own any assets or have any income they pass the means testing. Its effectively a bonus. They don't need to hide since they are within their rights to get it.

There was a video clip a couple of year it were either the Google or Apples CFO sad "We pay 100% of every dollar of Tax we owe everywhere in the world"

The joke was their tax bill that year was zero despite making billions of dollar is revenue.

Point is means testing sucks, its hard to enforce and you always end up with loop holes.

the Joneses. A little naive.
No, unemployment benefit which is not means tested.
However, for example try community services card and residential care.
Knew some farmers. Property was in a family trust; wife was a teacher. Bought additional runoff blocks and had overseas trips (for "research into plants to establish a nursery). Children got accommodation allowance at university despite farm and herd being valued as multimillion dollars. Today would qualify for superannuation if it was means tested as draw salary to meet living expenses; house part of the farm trust as is the car.Try residential car subsidy (for the elderly in rest homes) To qualify you can't have assists more than $250,000 grand which includes house and car. One qualifies for subsidy when assets reduced to threshold. We hear of FHB using bank of mum and dad. Yipe, parents happy to help children out and gift money; way of passing kids an inheritance without it going to paying for care which the subsidy will pay for. MSD will check gifting but only go back a number of years; certainly not 20 years.
Yipe, the joneses there are people structuring their affairs and these are only two I am aware of. Obviously you are straight up and honest(and possibly a little naive) whereas not all are like you.
Ask yourself why trusts became so popular twenty years ago; fortunately MSD are looking through these. Spoke to my mum,s lawyer about her care and as to how long her assets would fund care. Said that MSD had been challenged and court judgement went against MSD so even a trust may give protection of assets and ability to get residential care subsidy.
If superannuation is means tested there are ways of avoiding this - believe me. At it is all legally ok if not morally so.

Why should it be means tested people pay their taxes the same as everyone else. National Superannuation is exactly what it says, people have paid their taxes believing that the would get a Pension when they retired. It is not supposed to be a welfare benefit it is what we paid our taxes all those years.

What you feel is not the law. There is no guarantee you got from the government that said you get superannuation when you get to a certain age.

Your taxes you pay today do not get saved up for your superannuation. It is by the grace of the next generation that you will get an income when you are old.

By that logic if you were on the unemployment benefit all your life you do not get superannuation as you haven't paid any tax?

Please explain to me how superannuation is not welfare payments.. It is the largest spending by ministry of social development, who also pay the unemployment benefits. http://wheresmytaxes.co.nz/

The joneses
"Taxes not saved up ..". Not entirely true; What is the Cullen Fund all about then?

Far too little and far too late. And aunty helen was stupid for doing it according to one boomer landlord I work with, should have used it to pay off debt according to him, even when you point out thats it has doubled in value in just a few short years.

Everyone agrees that retirement age should increase and it is good for NZ.

But no party dares to do this good thing to NZ.

This is democracy -- tying up the monsters doing evil as well as the angles doing great.

Let's just glide in the middle and see where we land.

It's not a general democracy problem. The UK are increasing pension age from 65 to 68, Japan from 62 to 68, Germany from 65 to 67, France from 62 to 67, Denmark from 65 to 67 just to name a few examples.

Democracies are perfectly capable of doing unpopular things that need doing, it's just the New Zealand hasn't been brave enough to step up yet.

At least, their politicians are not as useless as ours, isn't it?

You two crack me up.
"Everyone agrees that the retirement age should increase" (evidently not by the comments on this article alone), but at the same time this is an unpopular thing to do? Hmmm, not sure if you two realise what unpopular means.
"But no party dares to do this" - again, evidently not if you read the article where National stated they were going to raise the age. Lol.
The funniest part is the whole democracy angle. Try suggesting a change in policy to a dictator. Haha.

To all the people saying that the reason we need to raise the retirement age is simple, "because we are getting older", need to be a bit more analytical in their approach. There are far more factors to consider than this, for example how long do labourers live for (just one factor).
Also, what are the spending priorities of the govt. THe article also talks about the health budget forecast to be a lot higher in percentage of GDP in the future. Does that mean we should start cutting the budget? No? Well why use that as the sole reason to increase the retirement age?
What are the priorities? What other spending is there that might be pushed out in the future as lower priorities than health and retirement spending?

I don't think everyone agrees that retirement age should increase, but I do think it's the right thing to do. It would certainly be unpopular because the negatives are so much more obvious than the positives (the counter-factual of paying more tax in 20 years time is not as obvious as knowing you will receive your super payments 2 years later than you thought). As I said, many other democracies have got on with it, and good on National for giving it a go too.

The democracy angle, I find the xingmowang posts quite frequently on the downsides of democracy vs other systems of government, I like to provide some balance as I think democracy has achieved a lot for the world and continues to do so.

Agree that those with physical jobs may struggle to work till 67 or 68, I would hope that unemployment or sickness benefits will bridge the gap to super for those physically unable to work until then and unable to find alternative, less physical, employment. Otherwise, yes it's quite simple, a normal retirement is now around half the length of a normal working life, where it used to be maybe a quarter. The balance of 'tax in' while working to 'super out' while retired very quickly skews and becomes very expensive. Sure, we could pay for it but it will come at the cost of other government spending. Is a guaranteed retirement income at 65 more important than education, health, police etc?

Again you claim it is quite simple, while at the same time raising (but not at all solving or going into any detail) the issues of:
1. The fact that while our lives are getting longer, this doesn't necessarily mean our physically able lives are getting longer. I would love to see some analysis of where the increase actually is - i.e. are 85 year-olds now able to 'survive' for a few more years? How about a bit more thought about how we as a society are to decide when someone has become physically unable to continue in their job, and therefore qualify for a sickness benefit.
2. What our priorities should be in government spending. You raise 3 biggies - education, health and police. I don't think anyone wants retirement spending to be a higher priority than these, but why don't we keep going down that priority list in detail until we get to a category of spending that is of a lower priority than retirement spending. Is there anything the govt spends money on that you would consider a lower priority than retirement spending?

"Otherwise, yes it's quite simple."

1. I'm not an expert on this, but a quick google found some data here, particularly page 18

https://www.health.govt.nz/system/files/documents/publications/independe...

Independent life expectancy for males increased from 63.8 -> 65.2 from 1996 to 2013, with a further period of 'dependency requiring non-daily assistance' which has increased from 7.5 years to 10.2 years, and a final ' dependency requiring daily assistance.' which has increased from 3.1 to 4.1 years.

Agree that there will need to be some thought on physical ability, but I don't think that is beyond us as a society to figure out.

2. paying for someone else's retirement when they are capable of working is pretty low on my list. I have no problem with people retiring early, but I think that should come from private savings rather than taxes.

I assume you googled that prior to coming to the conclusion that the retirement age should be raised. And I assume that you realised prior that there is more complicated stuff to be figured out regarding physical ability. And I assume that have your exact priorities worked out when basing decisions around % of GDP.
(I'm being sarcastic; I don't think people have considered any of this, including politicians - this being my point).

Anyway, I think we are starting to make progress into the detail that is required BEFORE we make a decision.

On point 1. I'm not sure how you read that paragraph - does the age of 65.2 refer to the age of being physically able?
How do these findings affect your conclusion of raising the age?

Some thought on physical disability - I really think you are opening a can of worms here by suggesting that labourers can make it through to retirement age via sickness benefits. I don't know the solution to this one.

On point 2. It sounds like you lean towards people becoming more self-sufficient in their savings? If so, there are probably a whole raft of govt expenditures that you would consider to be low priorities, that we could easily reduce or even get rid of.
There is also the issue of reducing the incentive to save for your retirement if you means test it. The losers here are (again) the middle class who save enough to be just outside the criteria for receiving super, which makes a mockery of them even saving hard for that amount in the first place.

It is simple.

Raise the retirement age progressively to 67 or 68.

But what about the people who can’t work you ask?

Easy, make KiwiSaver compulsory and keep the age for that at 65.

Therefore, if you can’t work between 65 and 67 you can use your KiwiSaver. Problem solved.

Fact is, one of four things will happen:

• Taxes will go up significantly
• Age of super will rise
• Means testing of super
• Massive cuts in health expenditure - much worse access than today.

Which of these do you want?

I agree, we are getting older. But age is more than a number.

We may be living longer, but what at what cost.

We are fatter, more diabetic, more cancerous, more (insert nearly every other medical condition here), more depressed, more tired, more.....

These are all linked to lifestyle. A decent diet and exercise goes a long way and I've certainly been out-cycled by people well into their 60s and 70s. Nothing is guaranteed of course, and something will get you in the end but I currently feel like I'd be happy to have a long life expectancy and plan to look after myself so I can enjoy it.

Nope, lifestyle has an effect, and for many its quite large, but evolution and the genetic lottery has set each persons baseline. Some people just aren't going to live (in any meaningful sense of the word) past 70 even if they live on kale and beans and quinoa and cycle everywhere and avoid alcohol their entire life.

Well yes, we don't have a world where everyone lives to the same age. I think the evidence is strong enough to say that living a health life not only gives you a longer life but a better quality life.

https://www.sciencedaily.com/releases/2017/07/170720113710.htm
https://news.harvard.edu/gazette/story/2018/04/5-healthy-habits-may-incr...
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4901087/
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3900831/

"I've certainly been out-cycled by people well into their 60s and 70s"
I don't doubt it, but how many 60s and 70s have you out-cycled? my guess is the number will be much higher.

As Pragmatist has said, most of the factors are pre-defined genetics.

But even much of the current "Lifestyle" is the sole reason the age shouldn't be lifted.

We are fatter, etc... because we spend more time at sedentary jobs - have less active/family time, more work related stress.

So logically if you Increase the work, you increase the related lifestyle issues.

Of course I do agree with your overarching point, eat well and exercise. Your body (and mind) are your most valuable assets.

Hit and hope is not good enough Thank you

There is no need to raise the qualifying age for NZ Superannuation. A form of self-means-testing could be introduced now, by having two income-tax scales. People over 65 who want the pension should pay tax on all their income, including the imputed income of all their wealth along with the family home, at a level that efectively would give the pension only to those who need it, and clip the wings of the rest to help with the payout. Alternatively, those over 65 who choose to forgo the pension would stay on the same tax scale as the community at large.

The much hated Income Surcharge was probably the best solution.
Super was universal but if you had income (from employment or otherwise), above a certain level the super effectively abated as you earned more. Assets were not considered.
It's unpopularity seemed to be due to this abatement rate being too steep and although later lowered it had earned a bad name and become a political football.

The retirement age will rise to 80 once all the Boomers are too old for their annual tax payer-funded trip to Europe.

Scrap superannuation. I don't want to be taxed to pay for boomers pensions when I will never get one myself.

My preferred idea for super is to make it a guaranteed number of years before death. For example, we decide that super should be available for 20 years. When live expectancy is 85, then super starts at 65. If life expectancy increases to 87, then super age is revised to 67. Revisions happen on a yearly cycle and lag 5 years to allow people time to adjust their finances.

What happens when people opt to take super at the earliest possible age, then live more than the guaranteed number of years? Kick them to the kerb with nothing in their eighties? Sorry,. but your idea is a fail.

I think you've misunderstood (or I have). I took it as a mechanism to automatically adjust the retirement age as population life expectancy increases, not an 'everyone gets 20 years' guess.

So just stuck with problems of predicting at age 40 what the super age will be when you are 25+ years older based on forward looking life expectancy estimates and unknown advances in medical science and health funding in the following 25+ years?

Yep. Life is full of uncertainty, embrace it. The only thing being defined here is when you receive super, you can choose to either put away a little extra to tide you over the year or two you might not receive it, or just work for an extra year or two when you get there.

Nothing is stopping retiring at any age using your own funds, this is just when state-funded super kicks in.

If your concern is around what the age will be at retirement then the model could be adapted to predict forward. The point of this model is it is based on actuarial science rather than the whim of the politicians and voters. It also allows easy cost calculations for future years:

Total cost of super for year 20XX = (number of people over life expectancy -20y)*super rate*inflation estimate

I think idea is that it is used to determine the super starting age and not that it's fixed for 20 years. The idea has merit because it continuously pushes out the super age as we all live longer on aggregate.

This is based on average actuarial life expectancy in NZ. I don't suggest trying to calculate times of death for all individuals.

..nice idea but..... will you account for race, sex, job type, genetics, lifestyle and so on...all of which are relevant with life expectancy?

I'd say, as a rule, no. The existing 65 is an arbitrary age for all and not adjusted. you could make a good argument for Maori but I'd prefer the effort went into improving health outcomes to bring them into line.

The more you tinker with, the more unfair it will become. Universality also has the benefit of low administration costs.

Tinkering with super will be political suicide. But the age does need to rise, gradually to give people time to plan. And by the way, Boomers lived through post-war austerity, Vietnam, crippling inflation, mass unemployment and recessions, massive unrest in the 60s and 70s, especially in Europe and the States, university entrance was on merit, not as a right, there were far fewer money and time wasting gadgets, and jobs for most people were manual grind. House prices seem to the cause of this generational dissent, but population pressure (that's YOU) and Chinese money seeking refuge are in large part to blame. Envy is so negative and energy sapping, especially when it is misplaced.

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By 'post war austerity', are you referring to the post WW2 economic expansion? Aka the postwar economic boom, aka the long boom, aka the Golden Age of Capitalism?

Population pressure is from mass immigration, which is a policy to increase tax revenue, which is politically expedient way to pay for boomer pensions and increase competition among less established younger workers - which plays into the hands of business owners who are invariably older. it's a policy by baby boomers for baby boomers.

Despite all this, I continue to meet large numbers of baby boomers who have made absolutely nothing of their lives. That's what's truly sad - the mass of grey haired bus drivers, receptionists, customer service workers and supermarket staff who invariably have a bad attitude, as if they somehow deserve better in life.

Those 'greys' you mention are the very ones that Super is supposed to help. They are the ones on whom life has likely dumped a shitty deal. Yes some may have made some poor decisions. As to deserving better in life - they grew up in a world where the politicians promised them they would be cared for when life dumped on them, and in their dotage. their biggest mistake was they believed those politicians, and couldn't see them pillaging their retirement funds, cow-towing to spoilt brats who think the world owes them a living and grumbles that others have something they don't have, like calling for super to be scrapped because they don't want to pay tax that will in part go to pay the super they were promised. They couldn't envisage the politicians changing the economic model of their world into one that favoured only the rich and turned all others into slaves. They represent the majority of the population who could only aspire to 'unskilled' work. Who, in the modern world, have limited transferable skills to entice a potential employer, but in tough times took any job they could get, even menial ones that only pay the minimum wage. Most of them probably still struggle to make ends meet. Put yourself in their position - how would you feel?

* their biggest mistake was they believed those politicians, and couldn't see them pillaging their retirement funds, cow-towing to spoilt brats who think the world owes them a living and grumbles that others have something they don't have, like calling for super to be scrapped because they don't want to pay tax that will in part go to pay the super they were promised.*

Pillaging their retirement funds? What retirement funds were pillaged exactly? Go on, name which govt ransacked which retirement funds. AFAIK there never were any retirement funds to ransack until the 2001 superannuation fund.. far too little and far too late, and then National stopped contributions.

The boomers never planned to fund their own retirements, they thought they would just hand the following generation the bill for that, their healthcare and the national debt. And then they voted to burden the gen X and later generations with student debt to top it off.

And you are surprised the youth of today are raising their middle finger at you?

Piggy Muldoon found the Govt Super fund, the predecessor to the current 'Cullen fund' an embarrassment (because it was worth so much) and pulled it into the consolidated fund, then squandered it!

And yes they were promised that they would be cared for right up until the eighties. Don't believe me/ go ask your parents and grand parents.

The government super fund from what i can see was only for govt employees. What about the rest of the boomers?

Growing up in that era, i understood it to be the money put aside to pay for people's employment. In the 70s, possibly 80's it was refined down to just Govt employees. Regardless, people were repeatedly told a portion of their tax was being put aside for their retirement. Don't forget that in those days, without computers and the internet, information flow was very much limited and people did tend to take politicians at their word. They would have been very loathe to consider that one may have been economical with the truth. I certainly know that while we may look back today whimsically, that life wasn't easy. My family were what was considered middle class, but the only way my father could afford a house was to build it himself (can't do that today, and by the way it is still there and still rock solid). He was a Govt employee and yes they got a special rate on a mortgage (I seem to remember 3%), but only earned enough to pay for a section and then fund the house as he went along. Could never afford a new car. Our flashest car was one he found under a hedge and restored (Morris 18) meat mostly came from hunting, and we would go out and help a few friends on their farms and that produced the odd mutton. I doubt that there was much saving going on. Certainly when he was killed, mum wasn't left with much to go on.

Wait, your father was a government employee who spend all day restoring car, building houses and hunting? What did he do?

All day? He worked a 40 hour week, all that was done in the time he had left, weekends, evenings, holidays. As far as i am aware my parents never travelled overseas. Family holidays never strayed too far from home. We never got to the south Island, although I recall dad did once with the Deer Stalkers

It wasn't easy.. and yet your father managed to buy and build a house, and raise a family on a single middle class income by the sounds of it. Do you realise how many two middle income families are choosing between house or kids today?

And i'll also add Muldoon was 1975, that was 40 years ago, there was a lot of time to do something since then, and Muldoon was voted in, in part by campaigning on cancelling Labours (very kiwisaver like ) compulsory superannuation plans that would have put money aside for individual retirement savings.

Yes, and we didn't consider ourselves as poor. it was just normal. It is funny though when i consider the expectations of generations since - to me they lack understanding and have excessive expectations. But I truly put responsibility with the politicians, for failing to act for the people they supposedly represent. they are too self serving, have their snouts too far into the trough, and have no idea how hard it is for people these days. I am not in favour of raising the retirement age, not because it will impact me, i am old enough now so that it won't, but because i know how hard it is for some, and even 65 is too late. Sickness or other benefits don't cut it. MSD's onus is to get people off benefits, not support them on them.

A large part of the problem here is inability to see it through the other parties eyes. Like you talking about the cars.. In the 70's etc cars were expensive, they aren't anymore, a cheap new car is 6 months wages for an average income worker, and a very serviceable used car is a couple of months (pre-tax) income. A cheap banger is a couple of weeks income. And the way life has changed means the relevance of some of these costs are very different.

I look at this article and laugh at the cost of TVs, and that was 2011, a mere 7 years ago. Yet some of the other costs have gone the other way.. being on here you have no doubt seen many discussions about the cost of houses then and now. Education is another big one.

I find the education issue an interesting one. I think the move to user pays was a left wing push back against elitism. Lets face it it wasn't common for blue collar families to send their kids to Uni. But ultimately I think it has back fired, because in the modern world everyone understands that everyone should be able to get an higher level education, and user pays just makes it too difficult for every one. I believe universities are vital for the country's economy for a whole raft of reasons, but to rely on user pays creates all sorts of issues.

Government employees contributed to what WAS known as the Government Superannuation Fund not the public taxpayers. I think I am right in saying that the Govt contribution share to the GSF were stopped around 1999 or some such thing and it was disbanded then. I Cld be wrong here though. When I started work at 15 for the NZ Post Office way back a thousand years ago in 1963 it was compulsory for all NZ Govt employees to contribute a percentage of their wages to the GSF. My own father started with the NZPO in 1935 age 15 and with the exception of 6 years at War he resumed at the NZPO in 1946 still contributing to the GSF. He retired at 55 after 40 years of service, died at age 91 and received more from the GSF than he ever put in. Not in existence now.

Yes Gin, you are right. Men had to retire after 40 years service with the Government when the received the then government super and when they were 65 they also received National super. Women had to retire after 30 years service when they received their government super and also got their National superThe age limit was to enable the next generation to have good jobs and to stop the elderly hogging onto them. My Father retired at the age of 56 after working 40years with the Railways. He then got an office job with Vibrapac and loved it. He said he had no more responsibility!

Mate, it wasn't a long boom in 70s Britain under Wilson, Heath et al. And Thatcher ripped the heart out of Britain in the 80s, causing mass unemployment north of Watford. The 90s were better but Gen X Z Y or whatever were around to enjoy it, too. And these 'people who have made nothing of their lives' may well have happy marriages, a good social life and be content with their lot.

Mate, it wasn't a long boom in 70s Britain under Wilson, Heath et al. And Thatcher ripped the heart out of Britain in the 80s, causing mass unemployment north of Watford. The 90s were better but Gen X Z Y or whatever were around to enjoy it, too. And these 'people who have made nothing of their lives' may well have happy marriages, a good social life and be content with their lot.

*university entrance was on merit, not as a right, *

Heh, and it isn't today?.. these days you need UE + at least average grades just to get into an arts degree at Auckland uni. Want to do something in science or engineering.. better have excellent grades.
https://www.auckland.ac.nz/en/study/study-options/find-a-study-option/ba... (click entry requirements)

*but population pressure (that's YOU) *

No, NZ natural population growth is not the cause of the housing shortages, its all the immigration. Without the mass immigration there would be far less housing demand.

"Net migration meanwhile, has surged. New Zealand saw a net loss from migration in 2012, but migration overtook natural growth in 2014, and is now more than double natural growth."

*Envy is so negative and energy sapping, especially when it is misplaced*. Might say the same thing about finger pointing eh?

Means testing now please as it is in Aus! Its absolutely disgusting that the Boomers in NZ are swanning around on pensions, owning all the property including rentals that they have priced younger generations out of and presenting their gold cards at the movies or on the waiheke island ferry.
This is after a life of free tertiary education and a dirt cheap cost of living and housing. An absolute rort that needs to stop now.

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While we're on this, I present a modest proposal on education funding:

Everyone pays the same inflation-adjusted cost for their university education, no matter when they received it. If they have already received it for free, the cost of it at today's rate is deducted from their pension at the standard 13% student loan repayment (or, given the swanning about by some such as Stephen Joyce, perhaps it should be more that pension payments are delayed entirely until their student debt is paid off).

Suddenly, what's good for the goose would be good for the gander again, no longer begrudged because one would rather have a tax cut than help young people start with less debt.

Good idea. That would be a suitable 'payback' for all of those that studied but never worked, or studied subjects which had no substantive pay back to the tax payers.

Why stop at retrospectively charging for education ?
Surely we should also retrospectively claim any health and social benefits anyone alive ever received ?
Why stop at that - we could go a couple of generations back and charge the descendants of the deceased recipients as well !

I guess we should also repay any excess income tax paid when the rates were higher ..

In the 2013 census the baby boomers made up 30.8% of the population of that only 19.16% had bachelor degree or higher. Of course that will also include those who studied as mature students so could have paid for their education anyway so you take those out. So more than 80% of baby boomers will be unaffected.
https://www.stuff.co.nz/national/politics/90189060/baby-boomers-v-millen...

People who have paid bugger all tax or been or benefits or welfare most of their lives should get a much smaller superannuation allowance!
The ones who have paid plenty of tax should get the most!
Where is the justice if people who rely on the state during working life time then get to live off the pension paid for by working people!
Many of you beleive that you are owed a living and are being kept by the working people paying tax including landlords, and then you continually berate them because they are financially better off than yourselves.
You have got your line of thinking totally out of sync

Why stop there? Let's just get rid of the whole social security system like those glorious countries in central africa

Many of you beleive that you are owed a living and are being kept by the working people paying tax

You've just described someone who has no need of a benefit but feels that money should be taken from workers and given to them because they're entitled to it. A bit of irony there.

People today are expected to pay into their own retirement scheme - Kiwisaver. You're not automatically owed a living from these working people paying tax. How very socialist of you!

I don't think I'm owed a living and am working on the assumption I won't receive any government assistance in retirement. However, I don't want to live in a country where those who have struggled for whatever reason are left to starve. Perhaps consider for a while the role that luck has played in your life, maybe you had good parents, good schooling, a good upbringing, no physical or mental handicaps, maybe a generous employer took a chance on you? Not everyone is as lucky as us.

Well said that man.

You're a bit younger than me mfd, but like you I don't see govt paid superannuation as being a significant part of my retirement income, I only wish kiwisaver had been introduced 10 years earlier and the superfund hadn't been put on hold by National.

MFD, there is no reason for anyone to be starving in NZ.

...thanks to the welfare system you are arguing against

Yes, I agree THE MAN. As soon as we can stop those who are a drain on society all their lives by not pulling their own weight from getting superannuation the better. That is why I say no residential property investors should get superannuation.

Ridiculous thing to say.
If you haven’t got landlords in this country then we are in major trouble as the State are horrible landlords and always have been.
Look at the crap houses that they built but we should not be encouraging this COL as they will be the pits.
Personally no one in our family will,require Suler but that doesn’t mean that we shouldn’t get it initially but we will be paying it back in tax anyhow.
Why should people who haven’t paid tax get superannuation over people that have paid plenty in tax?

Most of the discussion is about superannuation which is not something I would be confident on relying on with the coming problems. There will be something there so people don't starve but maintaining lifestyle will not be possible for many people.

Some will have an amount in kiwisaver but many will not have enough or may not be in a position to get contributions.

Much like any disaster you need to rely on yourself to get by and that means people should be saving for their retirement rather than taking gamble. Please plan for your retirement as soon as possible.
https://sorted.org.nz/tools/retirement-planner

The other issue for retirees is their nest egg becoming increasingly worthless because of a wage and price spiral. But CPI is nothing you say... only because housing is not included in the measure. House prices, debt and rents all all crazy and showing no signs of retreating which is the foundation of the spiral driving wages, which in turn drives the cost of everything else.

New Zealand , one of 11 countries in the world to receive lowest percentage of working wage at retirement.

https://www.weforum.org/agenda/2018/02/retirees-in-these-countries-recei...

interesting. Does it separate the countries out by where the retirement funds come from.. ie, where in the list are the countries with entirely socialised superannuation, and where are the ones with compulsory private savings schemes etc?

Lower the Super age to 60, encourage earlier retirement with Cadetships for young people.
Rollout a UBI for all people at 12k per year, then scrap all other benefits.

If you have a UBI then there is no super and no retirement age.. super is the UBI, and you stop working whenever you want to.

Exactly, an elegant system with no strings.

I could stop working already but why would I want to?

Many wouldn’t stop work, but some would - at least full time conventional jobs.
Many would take the opportunity and freedom to pursue enjoyable fulfilling work.
.
The challenge ahead for the developed world is to get more money into the hands of more people - not try to shut every channel down. The global corporates are not going to spread their profits via good wages to the majority as previously happened with SMEs etc.

Question; is it fair for politicians to balk at the cost of superannuation when they are guzzling at a trough that will not be touched in this debate, but which is far richer than any other Kiwi can access? And it is all funded by the tax payer.

I think the age should be 70 with the option of using your KiwiSaver to retire early if you have enough to do so. If you decide to retire early the govt takes enough from your KiwiSaver to cover NZ super payments until you are 70. If you are physically unable to work you can get a benefit.

So this would move most people away from contributing into their Kiwisaver under your scheme.
There is a reason for making Super universal and non-means tested, Everyone gets it equally. And there is no incentive to play clever tricks with hiding wealth or investments.
The universality means that there is very little poverty in the elderly population.
The current Super is a very effective, simple and compassionate system with very low overhead in administration. NZ Super is the envy of most developed countries.

only if we can afford it. If people start living to 120 do you think we can afford to pay them 65% of the average wage for 55 years? I think there will be some big improvements in lifespan over the next couple of decades, I just can’t see how nz super is feasible with a retirement age of 65.
I don’t see why peopke wouldn’t have KiwiSaver, it would just be an option to retire early.

Lifespans have peaked and are now getting lower.
https://edition.cnn.com/2017/12/21/health/us-life-expectancy-study/index...
NZ can decide however it likes on what it spends it’s money on.
There are many other areas on Govt spending that could be changed or cut.
A small incremental move upwards in age eligibility would a clean solution, but penalise Maori, physical workers, and the unfortunate.
Mr Makhlouf as a technocrat understands very little about New Zealand, it’s history, it’s values or its people.

Don’t you think the current system is setup for the white office workers who are easily capable of working till 70 but are paid two incomes just because physical workers need to retire at 65?

Lifespans have peaked in the USA with its rather crappy health system and welfare systems. Have a look at most of the Scandinavian/European countries + Australia and UK where they are several years more than the USA and still increasing. New Zealand does seem to be levelling off a bit.

Boomers don't care about the retirement age, they could retire anytime they want, sell that multi million dollar mansion and downsize. Unless your greedy and want to keep it all and therefore "Have to keep working" when in fact you don't. Smart ones I know just put the money in the bank and packed in work early. If you think life is great at beyond 65 and you cannot wait to get there, your dreaming, the best years are gone. The age to retire is age 50 having maintained your fitness to a level you were at age 35, take it from me I know.