The age of eligibility for NZ Superannuation

Alec Waugh is the chairman of the Consumer organisation known as Kaspanz (Kiwi Saver, Annuities, New Zealand Superannuation Protection Association Incorporated). He chairs U3A Takapuna Finance and Investment Group.  He has a Master of Public Policy and Bachelor Degree in New Zealand History.  He retired as a Police Superintendent in 2006 after 38 years of service

                       THE AGE OF ELIGIBIITY FOR NZ SUPERANNUATION

With the new Government pronouncing the eligibility date for New Zealand Superannuation will remain at 65 years, and National in opposition holding their position to a gradual rise to 67 years, the landscape on age of eligibility remains somewhat uncertain, With no Task Force on retirement income issues having been convened for a number of decades, political whim appears to be the driving force behind each yearly announcement. New Zealand leads the world with its twin model of NZ Superannuation and Kiwi Saver schemes. Recognised as the smart country by many offshore analysts in its approach to pension policy, New Zealand Superannuation costs and future projections out to 2060 continue as one of the lowest in the OECD.  As Susan St John and Clare Dale in their 2016 paper said “The projected NZS expenditure appears modest, especially if net rather than gross spending is counted, and when compared to current pension spending in other countries.”  New Zealand Superannuation is taxed unlike virtually all other OECD schemes, so why the compulsion by the MMP parties to pronounce weighty policy initiatives on this topic.

Part of the answer is a lack of knowledge on the topic. Only Auckland University has a very small but dedicated Retirement Policy and Research Centre. Few research units of the Parliamentary parties appear to have sound knowledge of pension policy or history, and are invisible at seminars. Another complexity is the perception that longevity is increasing, when the real issue is individual quality of life in senior years. People may live a couple more years, but it’s the illness and injuries and inability to work that matters. Economists have not helped with their crisis rhetoric and superficial comments, their assumptions and long-term projections are often flawed. Further, the lack of comparative overseas research is often missing from the debate. A range of New Zealand mostly male right- wing commentator’s compounds both the facts and perceptions.  David Seymour,  Matthew Hooton,  Mike Hosking, Larry Williams, Brian Fallow, are examples of those  making comments which sound profound at first hearing, but simply do not  have  the research knowledge or comparative analysis to cut it upon subsequent  examination. There are exceptions, the voices of calm reason and substantial evidence flow from Susan St John, Michael Littlewood, and Mary Holm. Be wary of those calling for policy change from just one perspective.  The reality is no other alternative model of Superannuation outside of the current exists, a model which has assisted women and kept the elderly from poverty for generations. When you add in the fact that, political parties have no accord between each other on retirement income policy, the potential for poor decisions is profound. There is no reason why NZ Superannuation does not continue for the generations to come!

The announcement by Prime Minister English contained elements of sound pragmatic political decision making. No changes for 20 years, and then a move upwards from 65 to 67 years. The change in residency entitlement (10 years residency to 20 years to qualify) is appealing to many New Zealanders. English met the essential element of allowing for a long lead-in time, allowing consumer’s time to adjust both thinking and saving patterns. But a number of other adjustments could have been included which would have made the Prime Ministers’ announcement significantly more substantial. It is of course a political announcement, vote for us and you will receive this offer. The Labour Party did a U-turn on their previous position, and will go into the 2017 election supporting the status quo. The worry here is who can trust Labour to maintain that policy position. What will next year’s announcement be!

What was needed, and would have provided a buffer for the Government announcement, was a task force report, similar to the Tax Working Group 2010. A political party making a policy call on New Zealand Retirement Income Policy without such material is risky policy.

What we do know is that over 40% of New Zealanders 65 years and over relies on New Zealand superannuation as their sole means of income. This is unlikely to change. Kiwi Saver savings are not substantial enough to make a lot of difference. The intergeneration tensions are a red herring; history shows many look back with rose tinted glasses and those looking forward often predict doom and gloom.

Every generation makes adjustments to the challenges faced, but the research on the topic indicates it all evens out. A rising problem for those in the 40-60 years group is they are on the retirement income treadmill, continually being pulled in multiple directions, saving plans in reverse, as they financially support adult children, and also looking after frail parents. Pre-occupied by others needs is the trend for this group, their own retirement savings eroded. This group is aptly called the “sandwich generation”. Research suggests that providing child care for those less than 5 years old, is now the dominant responsibility of grandparents. They are also coping with their children not departing the family home and becoming independent, but staying longer (nesting) and an emerging trend of children having experienced study and work experience, returning to the family home in their later years, seeking cheaper living costs. Parental hospitality, parental loans/guarantees to their children are everywhere. Today’s reality for many parents is they are supporting their siblings financially, detrimentally affecting their own retirement nest eggs. It is still not too late for the Government to announce a Task force to under pin their March 6^{th 2017} announcement.