Flexi Super – “an idea whose time is rapidly coming”

In the General Debate in Parliament yesterday Peter Dunne described United Future’s Flexi Super policy as “an idea whose time is rapidly coming”.

Recent major party policies on superannuation are not popular, either doing nothing or tinkering adversely affecting some people. Dunne said:

At the last election we saw the position taken by the two major parties, which was a polarised extreme in many senses: the National Party saying that the age of entitlement will remain 65 in perpetuity, effectively; the Labour Party saying that over a period of time it wishes to raise the age to 67.

The problem with both those positions is as follows: one is inflexible, and the other imposes a burden on working people to stay in the workforce well beyond the time that they might have planned to retire.

We are starting to see a rising tide of public information and public questioning now about the viability of the system.

Even before Flexi Super has been widely discussed it is favoured by the public over the National and Labour options…

What people are seeking is more flexibility and more choice, and I note with interest a recent newspaper survey that put a couple of propositions before New Zealanders.

When people were asked whether they favoured the status quo, 65; raising the qualifying age to 67; or giving people the option of retiring later for a bit more or earlier for a bit less, nearly 50 percent—49 percent—favoured the flexible approach.

The status quo was favoured by 29 percent, and 15 percent wanted to go to 67.

The poll results:

  • Flexible super age – 49%
  • Leave at 65 – 29%
  • Raise to 67 – 15%

In June last year Interest.co.nz collated Super age policies: What the different political parties say about whether to raise the Super age, and if so, when

UnitedFuture

Leader Peter Dunne has suggested introducing a ‘flexi-super’ scheme. The policy would allow for people to accept Super from ages 60-64, although payments would always be at a lower rate than normal. They could choose to get Super at 65 or hold off until after 70 and receive it at a higher rate.

National

On Monday, Key stood staunch on his pledge not to raise the Super age, telling Radio New Zealand that today’s report regarded costs in decades’ time, and no one was pushing for the Super age to be raised now.

Labour

The party changed its stance on Super in the run-up to the 2011 election. Labour’s new leader David Shearer wants to have cross-party talks on the escalating costs of Super and what needs to be done to preserve it for future generations. Shearer says he’s prepared to discuss Peter Dunne’s ‘flexi-super’ policy.

ACT

Since before 2008, the party has proposed raising the Super age. ACT endorses the Retirement Commission’s proposal to increase the age of eligibility from 65 to 67 over 12 years (same as Labour), saying it would be a fair way to give people time to adjust.

Greens

Its current policy is to keep the age of eligibility at 65. The party is open to cross-party discussions on the issue.

NZ First

Its policy is to keep the age at 65.

Maori Party

Wants to maintain the general age to at 65. However, advocates it should be brought down to 60 for groups of New Zealanders whose life expectancy is lower than average.

Mana

Opposes Super age increase and wants to see a “solution” for those with lower life expectancies like Maori, Pacific Islanders, and working class Pakeha. Its solution involves lowering the age of eligibility for these groups.

There seems to be a willingness by parties to discuss the super age. According to Dunne:

I note also with interest the interest that I have had from the Leader of the Opposition and from Government Ministers.

United Future, as part of its confidence and supply agreement with National, will lead a public discussion on Flexi Super. This will also generate interest in the whole superannuation issue.

There will be, within the next few months, a discussion paper issued publicly, as part of our confidence and supply agreement, inviting public feedback on this issue.

This is an idea whose time is rapidly coming. New Zealanders know that things have got to change.

Perhaps this year the age of eligibility of Super issue will get traction – that is long overdue.

And perhaps Flexi Super will provide the best solution. It allows the status quo for those who choose it, and those who want more flexibility would have choice.

Hansard draft:

Hon PETER DUNNE (Minister of Revenue):

This afternoon I want to talk about a subject that will affect all of us at some point in our lives. A few days ago I saw a billboard that said that 15 percent of the children born this year will live to be well in excess of 100 years. The issue that that highlighted, and highlights for us, is the issue of superannuation.

This country has been grappling with that issue unsatisfactorily, really for the last 30 years.

At the last election we saw the position taken by the two major parties, which was a polarised extreme in many senses: the National Party saying that the age of entitlement will remain 65 in perpetuity, effectively; the Labour Party saying that over a period of time it wishes to raise the age to 67.

The problem with both those positions is as follows: one is inflexible, and the other imposes a burden on working people to stay in the workforce well beyond the time that they might have planned to retire.

We are starting to see a rising tide of public information and public questioning now about the viability of the system.

No one is seriously suggesting that we should cut the pension—no one apart from the far right. No one is seriously suggesting a radical increase in the age of entitlement.

What people are seeking is more flexibility and more choice, and I note with interest a recent newspaper survey that put a couple of propositions before New Zealanders.

When people were asked whether they favoured the status quo, 65; raising the qualifying age to 67; or giving people the option of retiring later for a bit more or earlier for a bit less, nearly 50 percent—49 percent—favoured the flexible approach.The status quo was favoured by 29 percent, and 15 percent wanted to go to 67.

Within that survey is the answer to the question that New Zealand confronts, and that is why United Future, as part of its confidence and supply agreement, is promoting the concept of flexible superannuation.

A person who makes the choice to retire early at, say, 60 would get around 65 percent of the core entitlement of New Zealand superannuation, the person retiring at 65 would get 100 percent, and the person who chose to defer retirement until age 70, or to defer picking up their superannuation, would get around 130 percent of the core entitlement.

What that recognises is a couple of things: firstly, New Zealanders are working longer; and, secondly, and probably most important in the context of this debate, they want the choice about when they retire.

They do not want to be told by the State that they have got to work 2 more years, to 67, to qualify. They are uncertain about the viability of 65.

They want to be able to arrange their affairs in a way that they can make the choice.

What makes this policy even more attractive is that with the increasing uptake of KiwiSaver, in years to come we will have many, many more New Zealanders qualifying for a KiwiSaver payout at the age of 65.

So the argument that is raised by some, that you cannot afford to retire on a reduced rate of superannuation early, will be diminished by the fact that people actually know that there is a big nest egg coming at 65.

Flexible superannuation provides an answer to the issue that confronts New Zealand. It does not cut the overall level of pension expenditure, but it certainly stabilises it.

It gives New Zealanders more choice about when they retire, and people who feel that they are physically exhausted long before 65 can make some plans with certainty about picking up superannuation at a reduced rate at an earlier time.

Others who feel hale and hearty, or who are in a position where they are financially independent, could well choose to work later and then pick up their superannuation later.

There will be, within the next few months, a discussion paper issued publicly, as part of our confidence and supply agreement, inviting public feedback on this issue. What I note with interest is the overwhelming support that the newspaper poll indicated already, before this issue has really had a huge amount of traction in the public.

I note also with interest the interest that I have had from the Leader of the Opposition and from Government Ministers.

This is an idea whose time is rapidly coming. New Zealanders know that things have got to change.

If you go back 50 years, the age profile in New Zealand was the classic Christmas tree. Now it looks much more like a lamppost. It is probably going to become more like an inverted Christmas tree in the future.

What we have to do now is plan for that time and put in place a sensible approach to superannuation that is sustainable and that will last for future generations, and Flexi Super is that answer.

InTheHouse video of Peter Dunne’s speech: General Debate – 10th April, 2013 – Part 4

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