New Zealand's political parties should reach cross-party agreement to ensure a stable future for NZ Superannuation, according to Te Ara Ahunga Ora Retirement Commission.
This suggestion comes in the latest in a series of reports on funding for the elderly.
The report reprises the Commission’s now well-established position that the age of eligibility for superannuation should stay at 65, in contrast with views it held earlier.
The report also asserts that funding for NZ Super can be afforded by the Government, also in contrast with earlier statements.
If extra money is needed, then some sort of means testing would be preferable to raising the age of eligibility above 65, it says.
However, the main thrust of the Commission’s argument concerns the political status of NZ Super, and it says cross-party agreement is essential.
“A long-term political accord is important to best serve citizens and there is an opportunity to secure this,” it reads.
“The Government should encourage Te Ara Ahunga Ora Retirement Commission to investigate the possibility of a new cross-party accord on the retirement income system to provide stability and certainty for future generations of retirees.”
These comments come amid the fact that the age of eligibility of NZ Super has been an issue at every election since at least 2014.
The matter came up again at the last poll, where National and Act both called for the age to be raised, though at different speeds. However, they were reined in during coalition talks by NZ First.
The Commission is unhappy with this uncertainty, and wants to end it with cross party agreement, so that a vital long-term issue for all NZ citizens is settled.
“A new cross-party accord is desirable, to not only ensure broad political consensus, but also to gain general public consensus as a result of the process of establishing the accord,” the Commission argues.
“This would benefit future retirees by affirming stability, and any system change of NZ Super should be well supported by strong policy principles and independent data analysis.”
At the very least, the Commission wants greater certainty through more effective use of existing law.
This refers to the ‘political commitment’ clause of the New Zealand Superannuation and Retirement Income Act 2001.
“Extending the number of parties who make the political commitment under the Act would be a first step,” the Commission says.
“This special measure allows parties to signal their ongoing commitment to current policy settings, and imposes special obligations on the Government to disclose whether consultation has taken place with other listed parties and the results of the consultation.”
But the report says only the Labour Party, the National Party and the Greens have used the political commitment clause under Part One of the Act, which refers to NZ Super itself.
And only Labour and National have given a political commitment to Part Two of the Act, which refers to the NZ Super Fund, which aims to raise money for NZ Super.
The report urges NZ First, ACT, and Te Pāti Māori to come forward.
In a further suggestion, there would be a detailed fiscal, population, and environmental impact analysis of retirement policies every nine years.
In summary, the report says the age of entitlement to NZ Super should remain at 65. But if fiscal savings are needed, then income testing is the best of eight options which were looked at.
It notes that in the 2021-22 year, 33% of superannuitants had taxable income over $30,000 and 6% earned over $100,000. Income testing could be applied to all the over 65s in this bracket or could be phased out when they turn 70.
The Commission is not advocating this, but raises it as an option in the event of a fiscal crisis. And it would be better than raising the age of eligibility, which it says would harm manual workers, women, Maori and Pasifika.
To maintain this, the Commission declares NZ Super is a Taonga, not a burden and it urges political accord to protect it.
52 Comments
Let’s start by calling it what it is, untested welfare.
The entitlement to it that is so entrenched is what amazes me. I personally know a number of couples with millions on term deposit.
The quicker we have a plan to axe it the better. The rating agencies for one will appreciate it.
Many proponents/recipients treat it more like a loyalty scheme than welfare. "I paid taxes all my life".
Any suggestion that those with more than enough in retirement be deemed ineligible..."Scoff, I paid more than enough taxes to fund my pension several times over".
Income testing above $100k has the potential to save somewhere along the lines of $700m p.a.. If you're going to retire, then retire. Don't double dip by hogging the job and taking the pension, it'll allow others to progress in their careers. And who knows, might find someone better skilled in the role too!
But why should the focus be on income rather than assets? Put it this way - there will be plenty of people working past 65 because they still have a mortgage to pay. There will also be plenty of people not working who made bank in tax free capital gains from investment properties. Why should the latter be entitled to a full pension, but not the former? Asset testing seems a lot fairer than income testing I reckon.
Because you don't pay the bills with assets. And sure, there'll be a few working past 65 to pay the mortgage but they were paying the mortgage before they turned 65. It just means that if they are earning over $100k they cannot claim a pension, why should turning 65 suddenly entitle someone in full well paid employment access to welfare? Do we have to "be kind" and throw money at these people because they had a certain number of birthdays?
Assets can be dealt with by applying a notional interest charge based on term deposit rates. Where one invests should not affect 'benefit' rates.
That said, how easy do you think asset testing is?
Where will you get your army of forensic accountants? How will you treat trusts, gifts to children, friends or churches? How will you locate assets held overseas in non-cooperating countries? How will you treat a second home, bach, farm, Maori land, lifestyle property etc
And here's a thought.....how well did we deal with covid subsidies when revenue testing?
UBI solves this and the welfare system. This is where the debate lies - not with super.
If you're going to retire, then retire. Don't double dip by hogging the job and taking the pension, it'll allow others to progress in their careers
Sorry, but if the only way for you to progress in your career is for someone else to retire, then perhaps you're not really worthy of the promotion in the first place.
I disagree. I know a number of excellent and capable young in their late 20 who have lost patience with elderly fossils who will not retire. It is a major problem across govt, including health. Nursing staff are bleeding in an area one family member works - a major reason being the hopeless 70 yr mngr.
Complaints to senr management made for years. The response ".we are waiting and hoping she will retire soon".
Meanwhile said family member has obtained Aus rego and will leave NZ.
The health and govt sector is a mess.
We created a surplus role within the company for this very reason. To retain a young talented employee while we ride out the eventual retiring of a couple of older fellas. Sure, they're competent at their jobs but now the taxpayer funded pension is coming in you can see the absolute bare minimum being done while shit is shoveled onto others.
Because you don't pay the bills with assets.
Yeah, you do. If you sold an investment property for example and used that money to pay off a mortgage on the home you live in, you have 'paid the bill with assets' in the sense that you have used assets to eliminate what is most people's major bill (accommodation in the form of mortgage or rent).
why should turning 65 suddenly entitle someone in full well paid employment access to welfare?
Sure - but similarly, why should turning 65 entitle someone with a 2 million dollar house, a bach, a boat, and a million in the bank to welfare? My point is not that I think we shouldn't do some kind of means testing - just that I don't see why it should be income testing rather than asset testing.
831,951 people in NZ receiving super a year (March 2021).
the people earning at least 100k a year and collecting pension, at 6% of total, is 49,917.
Taking the conservative approach ( assuming they are all married and living together and get the minimum super available) @ $381 per person per week, this works out to 49,917 x $381 (per week) = $19million a week. Times by 52 weeks = $988million we are paying to these people.
Im not tax expert, but surely it wouldnt cost IRD $988million to put in place a audit/check/assessment on these 49k people.
988million is still a dip in the water, when you think 94% of the pension population would still receive.. ( $16billion a year we are paying to pensioners... )
That $20k isn't going straight back as super. It gets split out across all government spending as a percentage.
Super isn't viable in nz in about 20 years. it'll be costing 30-40billion a year. totally unsustainable.
have a look at super costs per year vs any other welfare in nz. it's 3x the next biggest expenditure. oh and all of them are tested.
Not necessarily, as the job they are doing wouldn't necessarily 'go away' - someone else will likely be hired or promoted (and pay the requisite tax on income) - and as everyone shifts around in the labour market as a result; a new person at the bottom of the skills/experience rung is employed.
Fat chance the two political parties in New Zealand will reach agreement on this subject and almost all others. Their tribes are too entrenched. I thought MMP was supposed, amongst other things, to lead to more co-operation not less. That has not been my experience in this country since I began residing here in1987. I would suggest things are still going in the wrong direction. New Zealand is a country where all that glitters is not gold. Then again I'm still here.
This is an article about parachute cords; it fails to address the canopy.
As such, it is reporting, not journalism.
The reality is that NO government has EVER actually earmarked the physical resources needed to underwrite such future-claims. And if they tried, they couldn't amass the necessary. It ain't there. By some orders of magnitude.
But by ignoring that - as the writer does - we can pretend the MUCH bigger problem doesn't exist.
Come on, Eric...
Exactly. Too many people viewing future superannuation as a problem of money. Money is only worth what it can buy and, unless we drastically change our attitudes towards conservation and investment, that money is not going to be able to buy as much as people will want it to.
Yes, it is reporting - and I'm thankful for that as it is information I hadn't read elsewhere.
Nothing wrong with reporting - the journalism/investigative reporting carried on this site is good too (such as the academic articles and the investigations into the Financial Services register).
I think your point needs to be made to the Retirement Commissioner whose position is being reported on here. You need to change his/her position.
The link to the latest of a series of reports is incorrect.
Link to the PDF:
The beautiful thing about NZ Super is that it is "universal". Raising the eligibility age would necessitate tailoring it for different groups in NZ society. Maori and Pasifika, manual workers and so on may require special considerations. The very small number of people who have high incomes and considerable assets while receiving super doesn't really warrant getting one's knickers in a twist over. For me, 46 weeks or so and counting...
I agree, Zac. Numerous studies have shown that NZ super is a pretty efficient and low-cost elder support mechanism. (just google them). However, from an economic behavioural point of view, I am shocked (though not surprised) by the generalisation by some (ideologically driven?) posters above that the silver gang is a bunch of exploitative boomers who have pulled up the ladder behind them.
Life is an ugly business and we older ones mostly have not had glorious decades of endless savings and asset price increases. Global conflicts, recessions, personal tragedies, bad governance, neurodivergence & misfortune have been our lot. And the disruption we have experienced will be like this for all generations in various forms. That is why we need a safety net for the elderly. It is basic humanity, to help those whose retirement savings are not enough or who have none at all. Sure, there are anecdotes of wealthy elderly who don't need govt super, but as Z notes, studies show it is not worth adding layers of bureaucracy and costs to eliminate this tiny minority.
They will get less than the current super generation if the retirement age is raised
Life expectancy has gone up so the statement above is not true on average.
or means tested. And of course it will be phased in so it doesn't affect the Boomers at all
Very very few Boomers want means testing, that's why Governments haven't brought it in. So it's the younger generations who are pushing for this, which is not that smart in my opinion because - as you suggested - it would likely be phased in and so hitting those same younger generations harder.
I'm GenX. Ok with retirement age being raised. Not ok with means testing.
Certainly not me!!!! In fact, I had to leave the job I was in with my first pregnancy as soon as I started showing :-).
Oops, forgot to mention we did get free childcare via Kohanga Reo - not the whole day (9am - 3pm I think) but in those days they did pick the children up and drop them back home - and fed them lunch for free too. Lovely, lovely people and experience for the little ones.
So, I suppose there are swings and roundabouts.
Agree, I like the aussie model, we could bring it in that all 18year olds have to start and employers have to contribute like aussie.....
NZ rules allow employers to say your salary is all inclusive on contributions.... thats wrong.
for the sake of the next generation lets sort this out now.
I think that would go down like a bag of cold sick for the very people complaining that they are paying for the old people right now. Young people have always paid for the retired, that is the nature of the system.
Would a compulsory savings system solve the problem. Yes, maybe, but only for those in their early 20s now, so a solution implemented now would be only viable in about 40 years. Then you have the problem of whether people would accept it. All these young people now complaining about supporting old people would be equally angry about 10% of their income being taken away to support them in their old age and they would most probably reject it. How would employers feel about putting in another 10% like they do in Australia, and what would that to do consumer prices and inflation etc. The Aussies got it sorted, their system started off small, with small contributions and ramped up, now they have this great system that we look at and would prefer, but we cannot have it overnight. The have built theirs over the last 30 years.
The other problem is that KiwiSaver is not the right vehicle, there are too many fees, the returns are pretty low and there is not a lot of flexibility. I don't have it and never will, as I can get better returns, with no fees so I can make a lot more money and retire much better off without KiwiSaver. So, the free structure and how KiwiSaver actually works would have to be completely re-done to get a viable alternative. The biggest problem with it is that you pay in tax paid money so there is no real incentive to use it (unlike Australia of course).
If we keep putting together boneheaded programs like KiwiSaver that won't support anyone in retirement (average balance is around 30K), then we will never get anywhere with this conversation.
but we cannot have it overnight. The have built theirs over the last 30 years.
I’d argue that even if we hadn’t scrapped the planned super changes back 30 odd years ago we wouldn’t be rolling in it today like AUS. In the game of resources they have a boat load and can hence lessen any recession through exporting i—demand raw materials, of which the money flows throughout their economy to keep things afloat.
I'm willing to not take the pension after 65 but tax me only 10 percent on my earning from all sources and as far as the health suppled by the government I will take care of that myself I would probably be dead if it was up to them anyway and as when I go to the doctor being over 65 they charge me 85 dollars hardly being free medical may get the odd prescription for free. Will that satisfy the younger generation me think not lol
If the income was means tested and not the assets, that at least encourages people to save for their retirement and may mean it will free up a job for a younger person, but whilst there are no checks being done, of course people will take it if it is on offer.
those getting salaries and super as well, does seem unfair, as it is a natural income boost without any extra productivity.
A good work about is if the annuitant has a salary of a set value, and they apply for super then the amount is set at a total income and capped. If they earn over the cap no super, earn less, then super applied until cap reached or value of super.
If the income is from other means, that is left alone, and what that will do is encourage investment. Earning interest doesn't take a job from a younger person.
There’s no short term fix.
Kiwisaver is the one thing that can make NZ very wealthy longer term - it will take 20 to 30 years for the eighth wonder of the world to work its magic. In that time many will need super as it is to survive.
As KiwiSaver balances build the returns on these funds invested offshore will flow back to people here. It will help reverse what NZ has struggled with forever - profits flowing out and lack of capital. We also need to look at how these funds can be invested in infrastructure here. Yes they will need a return but it’s local capital so the returns stay here.
Once we get to say 2 trillion invested, 60% offshore, at say 4% return this is $80 billion a year coming in with around $50 billion from overseas - it could/will be our largest export earner.
I personally think 50% of your KiwiSaver should be as an annuity and the balance as a lump. Even have different ages you can draw, starting at 60 up to 70.
Every child should have one with the state putting in say $500 at the start (zero fees to 18). This would be the most powerful $500 this child ever invests.
In time super can be a top up as required, rather than the base to survive on.
Yes we will have to fund super for the next 20 to 30 years but the long term plan is to reduce this.
Unless we are prepared to invest for the future nothing will change.
The Retirement Commission's call for political consensus on superannuation is prudent. Uncertainty surrounding retirement benefits can cause anxiety among citizens. Collaborative action among parties can provide clarity and stability, ensuring the well-being of retirees. It's an opportunity for bipartisan cooperation to address a crucial aspect of financial security for older adults.
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