Seymour slams Super policies

Act MP David Seymour has slammed ‘baby boomers’ (I’m one of those) that he says will “turn our country into a debt-ridden basket case”.

The Spinoff: NZ baby boomers are building a banana republic, and no one gives a shit

The Treasury has made it clear that current superannuation policies will turn our country into a debt-ridden basket case, and yet media remain largely silent and politicians in denial. Young people need to get voting in a hurry, writes David Seymour.

You could be forgiven for missing that the Treasury published its four-yearly Long-term Fiscal Outlook this week (please, please stay with me, I promise this is worth it). The gist of the report is the same as the previous two editions:

If no policy changes are made, by 2060, when current students reach retirement age, government debt will be 206 per cent of GDP.

No matter how well you prepare for retirement, you’ll be living in a banana republic.

No, it’s unlikely to be a republic, New Zealand politicians are as reluctant to deal with ditch the monarchy as they are dealing with escalating superannuation costs.

The reason? Ageing baby boomers who will be more numerous and longer-lived in retirement than any generation before them. Right now there are four working-aged taxpayers supporting every retiree, but by the time current university students retire there will be only two.

Probably – unless eating ourselves to earlier deaths reverses the improving life expectancy trends of recent decades.

The cost of pensions and healthcare as a share of the economy will double, the government will run large deficits, and the international financial community will demand higher interest rates on New Zealand government debt, leading to larger deficits.

John Key and Bill English claim the country can afford the huge increases in costs, or they don’t care about leaving the problem for future governments.

The first way of absorbing the change is to raise taxes by about a quarter, so GST becomes nearly 20 per cent and the top tax rate goes over 40 per cent, along with every other rate being increased by the same proportion. People embarking on their careers now would pay a 25 per cent extra “boomer tax” for being born at the wrong time.

There tends to be a bit of resistance to increasing tax rates, especially by this sort of amount.

Another alternative is extreme productivity growth, the private economy grows faster than ever for longer than ever, and public services become more efficient than ever. We basically trade our way out of this situation and become so rich we can afford all-you-can-eat pensions and healthcare for retiring boomers.

This is the Key/English gamble.

The problem is that pensions are tied to income so getting wealthier just increases the amount paid out.

The final option is to adjust pension entitlements. Follow Australia, the US, UK, Germany, Canada, to name a few, who have increased the retirement age so there are more workers and fewer pension recipients.

Seymour laments the lack of media coverage of the report and the predicted problems – but people have been shouting  about Super unaffordability for a long time, but politician’s ears are deaf to it.

John Key has torpedoed the debate by saying he’d rather resign than raise the pension age, effectively saying to his supporters: choose fiscal sustainability, or me. Labour and the Greens have followed suit, abandoning the policy after the last election. New Zealand First would rather serve yum cha at their party conference than debate the issue.

Almost every political leader is holding their hands up to their ears and chanting, “la la la la la.”

Peter Dunne tried to force a re-evaluation of Super in the last term of the current Government, proposing ‘flexi-super’, but English and Key looked like having no intention of  acting on the ‘discussion document’ that was done as part of their confidence and supply agreement with United Future.

If NZ First holds the balance of power after next year’s election there is now way Winston will allow any cutting back of Super payments for his primary constituency.

National under Key’s leadership is committed to kicking the Super can down the road.

Unless ACT gets a few more seats and is in a balance of power situation and forces National to do something?

That may be what Seymour is angling at.

To have any hope of success I think that Act and Seymour will have to promote Super change (not ‘discussion’) as a core election policy, and they will have to win enough seats to be able to force Key’s hand.

If Act succeeds in the election then the choice may be National+Act with Super reform, or National+NZ First with a booming Super budget with a risk of our economy blowing up (after Winston has retired or died so he won’t care).

I think Seymour has the gumption to have a go at this. Would he get enough support? Will younger people start to vote for Act to try to sort out their not so Super prospects?

Seymour Super pressure on Key

David Seymour continues to pressure John Key on the future of Superannuation in New Zealand, this time via Question Time in Parliament yesterday.

This is one way of differentiating ACT from National, on an issue that is of concern to many, the affordability of an escalating Super cost.

Seymour: “Does the Prime Minister plan to still be in office in the 2020s when the cost of superannuation to New Zealand taxpayers rises by $1.5 billion every year?”

Key has promised to resign rather than change New Zealand’s superannuation.

This continues a campaign from Seymour. In February in NBR ACT wants referendum on Super:

ACT Leader David Seymour is challenging other parties to support a binding referendum to determine the future of New Zealand’s superannuation system.

“This is smart politics, maybe a bit too smart,” says NBR political editor Rob Hosking.

“It makes John Key’s policy of not lifting the age above 65 — when every other country with a state pension is doing just that — look like the gutless dodge it is,” Hosking says.

“But it also gives Key an out, if a referendum votes on raising the age. If that happens, it will be good for the country.”

Seymour:

“If the public can vote on the New Zealand flag, a matter that is largely symbolic, why not follow the same process for another intractable problem, one that politicians have been dodging for decades,” Mr Seymour says.

“It is vital that we ensure NZ Superannuation is viable over the longer term, avoiding undue fiscal stress and pressure on tax rates, and achieving fairness across generations.”

Three weeks ago (at Stuff):

ACT is trying to get the other political parties to agree to a referendum on the future of NZ Super, which the party says is unsustainable in the face of an ageing population .

ANZ’s retirement calculator suggests that to live decently in retirement, a person would need to save about $622,000 in the absence of NZ Super.

An ACT/Seymour press release on budget day two weeks ago:

National’s Budget ignores elephant in the room

The Budget’s focus is too short-term and ignores intergenerational issues, says ACT Leader David Seymour.

“National is denying the demographic realities behind rising Superannuation costs,” said Mr Seymour.

“New Zealanders are living longer than ever, a trend which won’t go away any time soon. As life expectancy rises by about a year each decade it would be fair to raise the age of eligibility for Super by about the same.

“Otherwise, today’s young people will be forced to fund NZ Super through higher and higher taxes, with no guarantee of receiving the same benefits when needed.

“The longer we wait the more drastic will be the inevitable adjustment. We must recognise the need for more intergenerational fairness.”

And yesterday Seymour questioned Key about the affordability of Super in Question Time in Parliament.

Prime Minister—Statements on Superannuation

7. DAVID SEYMOUR (Leader—ACT) to the Prime Minister : Does he stand by his statement in the House last week that because New Zealand Superannuation costs are currently less than 5 percent of GDP, and are forecast to rise to 8 percent of GDP by 2060, this represents a responsible path for overall Government spending?

Rt Hon JOHN KEY (Prime Minister): I stand by my statement, which was “We have set out a responsible path for overall Government spending so that current settings for New Zealand superannuation are both affordable and fully factored into our long-term forecast.” That is true, as the Budget shows. Other parties in this House from time to time want to cut back on superannuation entitlements, while other people want to spend the money on something else. That is a fiscal choice they should put clearly to the electorate, including Andrew Little and his idea of means testing.

David Seymour : Does it not strike the Prime Minister as odd that he is commending OECD fiscal arrangements, given that countries like France, Greece, Italy, Portugal, and Spain are all facing a brutal fiscal adjustment that means pushing up the age of eligibility for pensions, increasing pension contribution rates, and shifting indexation from a wage to an inflation basis? Is that the future we are offering younger New Zealanders?

Rt Hon JOHN KEY : No, I think it is about correctly reflecting, actually, on the current position, which is that New Zealand superannuation currently costs 4.8 percent of GDP and is expected to rise to 8 percent of GDP by 2050. At the moment, the OECD average today is 9.5 percent and is expected to rise to 11 .7 percent. So, yes, although the costs of New Zealand superannuation will rise, I think it is affordable and within our projected forecast.

David Seymour : Does the Prime Minister plan to still be in office in the 2020s when the cost of superannuation to New Zealand taxpayers rises by $1.5 billion every year?

Rt Hon JOHN KEY : I certainly hope so, but of course there will be many elections to run on, and I look forward to working with the member for as long as he is the member for Epsom, which is where I live.

Expect Seymour to keep nagging away at Key and National over Super.

Surely the escalating cost of Super is worth a flag scale national discussion and referendum.

Labour staunch on raising Super age

Labour is promoting it’;s policy to raise the age of eligibility of National Superanuation again. RNZ reports:

Labour pushing later retirement age

The Labour Party is using the latest information on the state of the Government’s books to push its policy of gradually raising the retirement age to 67.

It’s not a retirement age. You can retire any age you choose.

It’s the age at which you become eligible for National Superannuation. Many people don’t retire when the become eligible, they receive Super while still earning an income.

If elected on 20 September, Labour would gradually phase in an increased retirement age of 67.

Anyone receiving a pension before 2020 would not be affected, but people turning 65 after 2020 would have to wait until they are 65 years and two months to get their entitlement. The retirement age would be raised by two months every year until it reaches 67.

Labour’s finance spokesperson David Parker says pension costs, which make up about half of all social spending, need to be addressed.

This would extend my eligibility age by two months. No big deal for me personally.

Ironically this policy is what many on the right think is essential but are up against a John Key wall of inaction, while some on the left will be spitting tacks again as they are strongly opposed to raising the Super age.

A past left wing discussion on the pros and cons of this Labour policy – The retirement age debate.

This would also be a no-go for any Labour-NZ First coalition agreement.

 

Standard retirement age discussion

A thoughtful and thought provoking post by mickysavage (Greg Presland) at The Standard on The retirement age debate:

Labour’s policy is to gradually change the age of retirement to 67 with an allowance made for those aged 65 who can no longer work. There are passionate views in support of this and opposing this.

Regrettably the financial analysis is quite clear. The current entitlement to superannuation will drain more and more of the state’s resources and Aotearoa will face a financial crisis in 10 years or so due to the baby boomer bubble approaching retirement.

Labour is trying to show that it is being fiscally responsible by highlighting this as an issue and proposing a realistic solution.

But it is a difficult line. There is policy that a 65 year old whose body is wrecked through work should be allowed to retire now. But allowing everyone to retire gracefully at the age of 65 years means that there will be jobs for 18 year olds to fill. Allowing older citizens to retire later means that there will be less jobs for our young

The debate really needs to be about how we share the resources of our society around. We need to make sure that those of us who are older can exit from the workforce with dignity and those of us who are younger can have jobs.

A commenter points out that Labour’s policy on Super has similarities to ACT’s.

Greg has close connections to David Cunliffe but says he blog comments on a personal basis – but here he seems to be trying to help the Super debate within Labour:

I thought that we should capture the thoughts in one post and let Labour (and the Greens and anyone else) to absorb the thoughts of commentators.

All parties and politicians should absorb whatever they can to try and work out an affordable way of dealing with Super. This must be done on an all party long term basis.

I’ll summarise comments in another post in a day or two.

Transfer of poverty?

Now we have proposals for a transfer of poverty, from oldies to kids:

Cut super to save at-risk kids plea

Two of New Zealand’s top children’s doctors are proposing an increase in the state pension age to pay for more services to stop child abuse.

Paediatric Society president Dr Rosemary Marks and Starship hospital child protection clinical director Dr Patrick Kelly say raising the pension age could fund measures to tackle child poverty and improve health and education services for our youngest children, who are most at risk of abuse.

Also:

Universal allowance needed for children

Prof Boston says New Zealand is unusual as it is one of the only OECD countries to not provide some sort of universal family benefit.

“There’s a good case for having universal assistance and particularly for young children because we know that from a huge amount of evidence having a good start in life really matters,” he says.

The Government white paper on vulnerable children will be released tomorrow.

Ruth Richardson – “NZ flunked the Super debate”

And not just Ruth Richardson.

Business leaders have been told in no uncertain terms that the Prime Minister will not break his word by raising the superannuation age.

Eighty-eight percent of more than 100 CEOs in an exclusive Herald survey said retirement funding should be raised to 67 from 65.

CEOs signalled in the Mood of the Boardroom Survey that the Key Government needed to tackle the eligibility age.

“The only real negative is the failure to address the superannuation debate when the public clearly gets it that something needs to change to maintain affordability,” said a CEO speaking under anonymity.

Jade Software chairman Ruth Richardson – a former National Party finance minister – said “New Zealand had flunked the Super debate”.

Navman chief executive Andrew Blakey said the post-election period “has been disappointing from Key”. He also said there had been numerous examples of poor political management pointing to “the complete head-in-the-sand approach to superannuation”.

Fifty per cent of CEOs also wanted the age-raising transition phase completed by 2017.

Twenty-three per cent said the phase-in should be completed by 2020 and 13 per cent opted for 2025.

But Bill English continues to hang tough:

Raising Super age not an option: English

Speaking at the Mood of the Boardroom breakfast in Auckland today, Finance Minister Bill English responded to calls from CEOs for National to reconsider its position on super.

English said John Key’s stance did not need to be explained again – “a politician made an undertaking that he’s not going to break”.

“If you don’t understand that then you don’t understand John Key. He said he wouldn’t raise it and so he’s not going to raise it.”

Jade Software chairman Ruth Richardson – a former National Party finance minister – said

“New Zealand had flunked the Super debate”.

Shearer correct calling for Super debate, so far wrong approach

David Shearer is again calling for:  “a genuine, open and honest discussion about how we can continue to afford to provide New Zealanders with financial support when they retire.”

I agree with that. It needs to be a wide ranging cross-party and inside-outside parliament discussion.

But how genuine is Shearer? In his latest call for discussion he also says:

“It’s not good enough for John Key to say that he’s worried about governing for today and somehow the future will look after itself.”

If Shearer is genuine about the need for non-partisan debate he needs to leave the political point scoring out of his “requests”.

No response from Shearer

And Shearer doesn’t seem willing to engage in genuine discussion on Super. Several times I have emailed him offering to join him in a campaign for Super discussion.

I have had one reply from his office:

“I am writing on behalf of David Shearer , Leader of the Labour Party,  to acknowledge your email.”

A Labour MP has also said they have passed on my offer to Shearer.

He has not yet  replied.

So I am publicly offering to join David Shearer in initiating cross-party, cross-media discussions on the future of NZ Super.

I await his response.

Pete George
ADASS: https://yournz.org/2012/06/03/adass/
petedgeorge@gmail.com
027 327 3468

NADASS

News About Debate About Super Solutions

Financial Services Council warns of NZ Super unsustainability

Tax rates will have to rise by as much as 28% to sustain the New Zealand Superannuation system in its current form, the Financial Services Council (FSC) is warning.

The council, whose members manage almost NZ$80 billion in savings, is the latest party to sound the alarm about a demographic timebomb which threatens to undermine the security of New Zealand’s cherished pension system.

Kiwis aged 65 and older will by 2015 outnumber younger New Zealander’s by 60%.

The Financial Services Council, in a report on the retirement and savings, predicts that the cost of funding the New Zealand Super will rise to 12% of GDP unless steps are taken soon to increase private savings along with other policy adjustments.

According to its modelling, the current 17.5 % income tax rate would rise to 22 %, the 33 % rate to 42 %, GST from 15 % to 19 %, and the corporate rate from 28 % to 36 %.

Interest.co.nz June 11, 2012

Taxes must raise to pay for super – report

National’s under growing pressure to re-think its stance on the retirement age following a report warning of a pending crisis.

The Financial Services Council says Kiwis are living longer and tax rates will need to rise by almost a third later this century to continue funding super at 65.

It says around half those born last year are expected to make it to 100.

RadioLIVE / 3 News 11 Jun 2012

NZers want cross-party discussion on super costs – survey

A new survey shows 80% of New Zealanders want political parties to hold discussions on future superannuation costs.

The Horizon Research survey was commissioned by the Financial Services Council, which represents the savings industry.

It asked 2500 people whether they supported political parties in Parliament entering into talks on how New Zealand can provide secure retirement income in the future.

Forty-seven percent said they strongly support multi-party talks on the subject, a third merely supported them.

Less than 2% oppose the idea.

Radio New Zealand News 10 June 2012

“Uneasy reality” of demographic time bomb behind Mercer’s call for suite of changes

The financial impact of New Zealand’s ageing population could dwarf the global financial crisis unless Government takes steps now to address the problem, superannuation specialists are warning.

In a discussion document, entitled “Security Retirement Incomes“, Mercer New Zealand (a default KiwiSaver provider) calls on Government to raise the age of eligibility for New Zealand Superannuation from 65 to 67. It also suggests Kiwis be encouraged to defer retirement to age 70, as well as introduce a plan for the “decumulation” phase of KiwiSaver, whereby retirees spend their KiwiSaver funds

Interest.co.nz  June 5, 2012

Class size revision – Super next?

Hekia Parata and National have done the right thing by listening to the cacophony of opposition to and advice on their attempted class size re-arrangement.

They reverted to common sense. It would be good if they could now patch up Government-teacher relatinships and work together towards the best options and outcomes for the kids.

Now National have shown they can listen and readjust their policies, maybe they can have another listen to the huge wall of opinion urging them to look at the Super issue.

ADASS

Advancing Debate About Super Solutions

There are increasing calls for a discussion on the future of our National Superannuation. It is expensive, and is going to get much more expensive. Can we as a country afford to change nothing? Or should we be considering options?

This blog is part of a campaign to promote discussion about our Super, with parties and MPs, in social networks, in the media. See:

During the last election Tim Watkins posted

Finally, we see the elephant in the room

The simple reason superannuation is such a big talking point now – and why Labour’s new policy is so significant – is that the super bill is one of the country’s biggest.

It’s the elephant in any room that has something to do with government spending.

Bigger than the dole.

Even bigger than the DPB. Because there are so many retired folk – many more than there are unemployed or sick.

Here are the numbers. This year’s Budget had a total social welfare spend of a little over $23 billion. So how does it break down?

Sickness benefit: 782.38 (3.40%)
Unemployment benefit & emergency benefit: 1,028.95 (4.40%)
Accommodation assistance: 1,264.23 (5.50%)
Invalid’s benefit: 1,346.84 (5.80%)
Student loans: 1,589.68 (6.90%)
Domestic purposes benefit: 1,894.64 (8.20%)
New Zealand superannuation: 9,575.37 (41.30%)

As you can see, superannuation is over 40 percent of the bill. Nothing else hits double figures. And as a share of GDP, the cost of super is forecast to double in the next 40 years.

And in a Herald column National’s Super problem David Farrar points out

Superannuation last year cost $8.8 billion and in four years time is forecast to be $12.3 billion.

It is a rapidly growing cost – does this make it a rapidly growing problem unless we address it? Should we at least be talking about it? Should our MPs be seriously looking at it?

John Key and Bill English think that nothing needs to be done while they lead National – National’s toes dug in Super and Key locked in opposition to cross-party Super, and Farrar:

He pledged that there would be no change not just if elected in 2008, but for the duration of his time as Prime Minister. He locked in the policy, and also said any breach of the pledge would lead to him resigning not just as Prime Minister, but as a Member of Parliament.

But Farrar thinks this was an unwise stance.

The lesson for both the current Prime Minister, and any future Prime Ministers, is to never ever make any pledge beyond the next term of Parliament. Doing so is both short-sighted and anti-democratic. Elections should be about choices. Policies should change as circumstances change.

So does Fran O’Sullivan:

Key sidesteps that old, old problem again

John Key’s Government would rather play the game of “pass the fiscal time bomb” than confront the real financial pressures that will beggar future New Zealand generations.

That’s the harsh takeout from the Prime Minister’s decision to (yet again) put off the day when a New Zealand Government has to foreshadow the introduction of policies to deal with its long-term liabilities.

It’s hard to believe the Government is prepared to sit on its hands until the 2014 election, by which time 2020 will be only six years off, let alone duck the issue until/or if it gets a third term in Government.

And Duncan Garner thinks something has to happen, starting sooner, for later:

Key’s superannuation position must change

John Key’s entrenched position not to touch the age of eligibility for New Zealand superannuation is unsustainable. He’s simply putting off a decision that must be made.

The Prime Minister is under mounting pressure to take a more responsible position.

No one is suggesting it needs to change now. But these things need lead time, and they need leadership – Key is offering none of the above on this issue.

He has promised not to change the settings as long as he is Prime Minister, but that surely doesn’t mean he can’t debate it. He can. And he should.

I agree. He should. We should. How do we make it happen?

Labour Leader David Shearer is actively promoting discussion on Super. He needs support from within his own party and from other parties.

There is a toe in the door – Dunne has given Key a get out of Super free card – this needs to be used as much as possible.

And we can encourage, cajole, push, insist. We can all play a party, and Your NZ is an active part of that. You can activate the campaign as well.