Labour’s Super policy

Labour have announced their superannuation policy. It includes pledges to keep the entitlement age at 65, and resuming payments to the Super fund.


Labour secures the future for NZ Super

A Labour Government will secure the future for New Zealand Superannuation so we can continue to provide superannuation to those retiring at age 65, says Leader of the Opposition Andrew Little.

“One of the first things a Labour-led Government will do is resume payments to the NZ Superannuation Fund, so we can secure its future. National’s failure to invest in the Fund puts the retirement plans of New Zealanders at risk.

“Despite finally running surpluses after years of trying, the Government says it won’t resume Super contributions until 2021/22 financial year, while promising tax cuts that will hand $400 million to the top 10 per cent of income earners.

“The value of the contributions not made by National during its period in office is nearly $14 billion. Currently the Fund is worth $33 billion. The NZ Super Fund estimates that, had contributions continued to be made, it would now be worth $52.6 billion.

“National has sold the future of New Zealand short by billions and billions. By the time National plans to finally resume contributions, a Labour Government will have doubled the size of the current fund to $63 billion.

“This will equate to $6,500 per person extra in the Fund by 2021/22 under Labour. More importantly, we can continue to afford to leave the retirement age at 65; unlike National which wants to lift the age to 67.

“The argument to lift the age from 65 just doesn’t stack up. I’ve spent 20 years working with people who struggle to get to 65 now before they retire because of the physical nature of their work; that hasn’t changed.

“I’m absolutely clear that there will be no change. A Labour Government I lead will keep the age of entitlement at 65 and we will re-start contributions to the New Zealand Superannuation Fund immediately.

“This election will provide a clear choice – only a Labour Government’s fresh approach will make the investments we need to secure the future for all New Zealanders,” says Andrew Little.


More from Grant Robertson via RNZ: Labour pledges to boost Superannuation Fund

Labour finance spokesperson Grant Robertson said if payments had continued over the past eight years, at nearly $53b, instead of its current worth of $33b.

“We cannot afford if we want to keep paying Super out to people in a sustainable way, to not be contributing to the Super Fund.

“We can’t lump on to future generations the full cost of Super, we need to spread it out.”

Mr Robertson said National made the right decision to suspend contributions as New Zealand recovered from the Global Financial Crisis, but the government should have restarted the payments by now.

“Back then National said when once they got into surplus they would restart contributions. They then changed their position to be tagged to an arbitrary debt-ratio. We don’t believe that’s correct.

“We can see from the past performance of the fund that New Zealanders would be significantly better off had we been making contributions.”

But the country would have clocked up substantially more debt, or would have clamped down on spending much more.

Labour’s commitments “can be funded out of existing tax revenue”

Labour leader Andrew Little says that any Labour policies can be funded out of existing and forecast revenues and tax rates won’t be changed.

In an interview on The Nation Little made commitments of sorts on not raising taxes:

We are not planning on any tax changes for the 2017 election. We will finely calibrate what we do once we see what the Government does in its foreshadowed tax changes, which we assume will be in this year’s budget, but who knows?

They are not planning any tax changes now but who knows what they might plan after the budget?

So we are focused and we are talking to New Zealanders about and I will make commitments to New Zealanders about the problems that are here and now. And the commitments that we’re making – all of them – can be funded out of existing tax revenue. That’s what we’re focused on. That’s we’re campaigning on.

So we will have to wait and see how Labour proposes to finance it’s policies. They have already talked about:

  • Resuming contributions to the Super fund and leaving the increase in costs of Super as they are.
  • Funding more police.
  • More health funding.
  • More education funding.
  • Increase social housing and state housing
  • Kiwibuild will build 100,000 new houses over 10 years (eventually self funding)
  • Labour said it would bring in three years of free post-school education over a person’s lifetime costing $1.2 billion a year by 2025 (the first year funded from money earmarked by the government for tax cuts).

So if National announce tax cuts or threshold adjustments Labour would overturn them or use them to fund policies?

Also:

Lisa Owens: Another thing is the Children’s Commissioner. He wants the Government to commit to a target of lowering the number of children in severe hardship by 10% over a period of 12 months. Will you commit right now to meeting that target?

Andrew Little: Ye—Two things we’re going to do. We will have a child poverty measure that we’re going to commit to, and I’ve already said every budget we will report on how we’re going against that measure, and we are absolutely determined to reduce child poverty in the way that the Children’s Commissioner is talking about.

…Yeah, because I think his figure is roughly 150,000-odd, and lowering that by 10% – I mean, yeah, if we can’t do that and we’re not prepared to commit to that – and I say we are – then, you know, we’ve got something seriously wrong going on.

That hasn’t been costed yet.

And it has to be remembered that Labour will need at least NZ First or Greens (or both) to form the next Government. They will want some of their own policies in the mix. Policies that are likely to cost extra money.

Any policy costings by Labour are pointless on their own. The cost of a change of Government needs to include likely NZ First and Green policy costs on top of Labour’s own.

It’s even possible that Labour will put forward a “no tax increase” policy but then ditch that in post-election negotiations with NZ First and Greens.

Financial credibility is likely to be a major election issue. Little will have to have some good answers to the inevitable questions of affordability of policies of a Labour led coalition that Labour may only have half the voting power in.

 

National’s Super age proposal

This afternoon Bill English announce National’s superannuation policy, which included a raising of the entitlement age in 20 years time.

There has been a lot of immediate reaction. I think people should think this through and discuss it sensibly.

There are political implications for coalition negotiations but that shouldn’t stop a decent debate without resorting to knee jerk reactions.

This policy won’t affect me as I’ll be on Super long before this takes effect.


Lifting NZ Super age the right thing to do

Progressively lifting the age of entitlement to New Zealand Superannuation from 65 to 67 is the responsible and fair thing to do for New Zealand, Finance Minister Steven Joyce says.

“Average life expectancy is increasing by around 1.3 years each decade and more older people are staying in the workforce,” Mr Joyce says.

“Greater life expectancy is of course positive but it does drive up the cost of NZ Super. While New Zealand has a more affordable scheme than most countries, the increasing costs would require future trade-offs – either restricting spending increases in areas like health and education, or increasing taxes.”

The Government intends to increase the age of entitlement for NZ Super by six months each year from July 2037 until it reaches 67 in July 2040. This means everyone born on or after 1 January 1974 will be eligible for NZ Super from age 67.

Other settings such as indexing NZ Super to the average wage and universal entitlement without means testing will remain unchanged; and the age that KiwiSaver funds can be accessed will remain at 65.

“Making a change over a reasonable timeframe will give future generations of New Zealanders more choice as to how they allocate their government spending,” Mr Joyce says.

“While others have called for an earlier transition, the Government’s view is that giving 20 years’ notice balances timeliness with being fair to current generations of working New Zealanders.”

Average life expectancy in New Zealand has increased by 12 years over the past 60 years, including by four years since 2001, when the age for NZ Super was increased to 65.

“When the age was set at 65 in 2001, a retiree could expect to spend about a fifth of their life receiving NZ Super. That has since increased to around a quarter,” Mr Joyce says. “Following this change, those eligible for NZ Super at 67 in 2040 can still expect to receive it for a quarter of their life on average.”

Mr Joyce says the Government’s previous position of not changing the age of eligibility was appropriate in the aftermath of the Global Financial Crisis, when New Zealanders were looking for certainty at a time when the Government’s finances were under pressure.

The Government is also proposing to double the residency requirements for NZ Super so that applicants must have lived in New Zealand for 20 years, with five of those after the age of 50. People who are already citizens or residents will remain eligible under the existing rules.

The Government intends to introduce legislation to make these changes early in 2018. The residency changes will cover people who arrive in New Zealand after the legislation is passed.

“These changes are important and need to be politically durable,” Mr Joyce says. “Scheduling the legislation in this way gives all political parties the opportunity to discuss their position with the public before it comes before Parliament.”

The proposed changes to the age of eligibility and the residency requirements are estimated to save the Government in excess of 0.6 per cent of GDP or $4.0 billion annually once the changes are fully in place.

Included in the legislation will be provision for parliamentary consideration of any need for any temporary transition requirements in 2030.

“It is not possible yet to determine what, if any, temporary support will be needed for people who are unable to continue working beyond the age of 65,” Mr Joyce says.

“Considering any requirements in 2030 will give a future parliament the opportunity to consider current information on health and labour market trends of different groups as the age change approaches.”

 

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