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.

A suggested Super solution

As soon as practical after this year’s election (next year) we should have an survey type referendum (non-binding)that asks us the public what we want. It should ask questions on:

  • age of eligibility
  • set age or flexible
  • means testing
  • rate of payment – indexed or otherwise
  • Super fund contributions locked in or not
  • targeted assistance for those who have to retire younger for health reasons
  • anything else?

Then all parties MPs in Parliament, using the help of an expert group, should work together to come up with a legislative package based on public preferences plus fiscal prudence and social responsibility. Any votes should be on a conscience basis.

The resulting package should then go to the public for a binding referendum vote.

Parliament should abide be this and pass the legislation if required.

Included in the legislation there should be a higher vote threshold required to overturn any parts of the Super legislation to minimise the chances of Super becoming a political football again. Suggested somewhere in the range of 60-75% required to overturn.

Then we would have future certainty based on public preference and Parliamentary consensus.

Super shit fight

Super has to be sorted out without election year posturing and shit fighting..

Bill English may or may not have deliberately provoked attention with his announcement of a proposal to raise the age of eligibility of getting ‘universal’ superannuation from 65 to 67 in 20 years time. The age was incrementally raised from 60 to 65 from 1992 to 2001.

After eight years of kicking the can down the road under John Key’s leadership English has differentiated himself from his predecessor with his u-turn, and Labour’;s Andrew Little  has u-turned in the opposite direction.

Every other party has joined the fray. Instead of having a sensible discussion it has been an election year Super shit fight.

We need a solution to the dealing with Super long term, which means we need a way to deal with discussions and decisions in the short term. The political posturing crap needs to be put aside, and the public need to become involved.

All parties should agree on a way to deal with it, starting soon (after the election).

See next post: A suggested Super solution

 

 

Super failure by all parties

Parties are busy posturing over superannuation. The flop flippers are as bad as the intransigents. They are all as bad as each other.

The sustainable provision of superannuation to an ageing population is a big and an important issue for New Zealand.

What all parties should be doing is committing to working together towards coming up with a consensus long term plan that can then be put into place with a degree of certainty.

Otherwise it will never rise above being petty pension posturing.

It looks like election year is a bad time to be discussing the future for Super.

 

Life expectancy and superannuation

One of the reasons given for needing to increase the age of eligibility for New Zealand’s universal superannuation is the baby boomer bubble that is will raise the number of people who qualify substantially.

Another factor is life expectancy – with more of us living longer that lengthens the time we are paid Super.

Here are life expectancy trends from Statistics New Zealand:

LifeExpectancyAtBirth

This is god for showing improved life expectancy trends, but I have always been unclear what this means for someone born in the 1950-60s. Perhaps we had a higher chance of dying young than babies born now.

This trend gives a better idea of what our expectations are now (subject to life’s lotto):

LifeExpectancyAt65

See information about this data.

In 1977 the Muldoon introduced universal superannuation for everyone from 60 years old.

Then average life expectancy for a man was about 65+13 years (18 years of pension), and for a woman it was about 65+17 (22 years of pension).

The age of eligibility was raise to 61 in 1992 and gradually rose to 65 in 2001.

In 2001 average life expectancy for a man was about 65+17 years (17 years of pension), and for a woman it was about 65+20 (20 years of pension).

In 2013-15 average life expectancy for a man was about 65+20 years (20 years of pension), and for a woman it was about 65+23 (23 years of pension).

So people are on pensions on average about three years longer than at the start of the century. And life expectancy is predicted to keep improving so this will keep growing – unless the age of eligibility is increased.

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.”

 

Super age change unlikely

It looks unlikely there will be any change to the age of eligibility for national superannuation despite Bill English saying he wouldn’t continue John Key’s commitment to not change it – see English open about superannuation.

English said there could be small changes to National’s Super policy but nothing drastic.

David Seymour has taken the opportunity to push for raising the age, but ACT are unlikely to be in a position to demand it in any coalition negotiations.

Winston Peters has confirmed that no age change is a bottom line for NZ First – Winston Peters’ coalition hinges on retirement age.

Mr Peters has promised the age would stay the same, at 65, and has made it one of his top bottom-lines going into any post-election deals.

“Not reneging on promises made to the retired and soon-to-retire people of this country is very important,” he told Newshub.

While “one of his top bottom-lines” doesn’t sound definite it would be a big shock if Peters agreed to an age increase. This is one policy he has remained consistent on.

The Maori Party is also unlikely to support any increase.

With Māori life expectancy rate lower than that of the general population, the Māori Party wants Māori and Pasifika to be exempt from any increase.

One of its policies is to reduce the superannuation age to 60 for Māori and Pasifika people.

So it is unlikely that National will push for an increase in election policy unless it looked like they could get a majority on their own, and it would be a huge surprise if they did have a majority on their own.

And Andrew Little has scrapped Labour’s Super age increase policy so if they form the next government it is unlikely to be considered.

This makes all the conjecture and political posturing a bit pointless.

UPDATE: English has just said on RNZ that there will be “no change to the entitlement” but it wasn’t clarified exactly what that refers to eg age or amount or universality.

On RNZ  Peters has just said that it’s not a bottom line for NZ First but that people could trust their consistency on the Super age for the past 25 years. “We’re not going to compromise”.

English open about superannuation

In an interview on The Nation this morning Bill English said that he won’t make the same undertaking that John Key did not change national superannuation.

However Newshub has taken it further, suggesting that a non-commitment at this stage meant that things could change.

All it means is that English isn’t ready to reveal his and National’s preference on super but he said he would be clear about it before the election.

Newshub: Bill English won’t make same superannuation promise as John Key

His predecessor John Key famously said he’d resign if he tightened eligibility for the benefit, which every Kiwi over the age of 65 can receive, regardless of their income or wealth.

Mr English told The Nation it was the right call to make at the time.

“People didn’t have to worry through tough times about what was going to happen.”

But with Mr Key’s departure, the fiscally conservative new Prime Minister says it’s a chance to “reset” expectations, with an aging population and more people working into their late 60s.

“I haven’t made the same undertaking as John, so we have the opportunity for a bit of a reset there.”

That could mean English won’t make any hard and fast commitment, or he could. Newshub chose to promote one option.

Changes to superannuation could be on the cards.

Talking to Three’s The Nation, Prime Minister Bill English said people need to know what’s happening before the election, hinting there could be tweaks made.

But whether that means a change to the age of eligibility or its annual indexing to wages, he won’t say.

“You’ll just have to wait and see. We would not anticipate any drastic changes.”

So this is pretty much non-news at this stage.

“People deserve to know what the Government’s view is when they go to the polls.”

So we should find out by then. Newshub speculation is meaningless.

And any views expressed by National or Labour before the election may be meaningless on superannuation anyway.

If either party requires NZ First to form a ruling coalition then any changes to super entitlements are likely to be off the negotiating table as a bottom line. It would be heresy if Winston Peters gave ground on pensions.

So regardless of what National or Labour say about super before the election voters won’t know if anything could change or not until after the election.

Winston’s bottom lines

There’s a lot of unknowns about how next year’s election will go. One of the biggest questions will be how National goes under Bill English’s leadership – will their support drop now John Key has stepped down? Will it stay dropped?

Labour are still struggling to be a major party. They seem to have given up competing head to head with National, and are now relying on Labour+Greens, but their Memorandum of Understanding doesn’t seem to have enthused voters.

There is one certainty – the media will continue to promote Winston Peters as ‘kingmaker’. There’s a good chance (but no guarantee) NZ First will end up in a position where they can play National off against Labour+Greens. Winston remains adamant he won’t do that until after the election.

But there have already a few bottom lines mentioned.

1. Superannuation

New Zealand First’s objective is to preserve the entitlement of New Zealanders to retire and receive New Zealand Superannuation (NZS) as it now is with eligibility at 65 years and as a universal non-contributory publicly funded pension scheme with no means-testing.

http://www.nzfirst.org.nz/superannuation

It’s very unlikely Winston would relent on this one.

2. No Maori Party

Ensure the future of the Maori seats is a decision for the people to make having examined the significant increase in representation numbers of Maori MPs under MMP.

http://www.nzfirst.org.nz/maori_affairs

And (in June 2016):

Stopping separatism …is a bottom line for NZ First working with any future government, Winston Peters says.

“…and for example a parallel state where you’ve got a state within a state because of separatist racist laws then we will not go down that path and I’m saying it right now.”

https://www.tvnz.co.nz/one-news/new-zealand/winston-peters-separatism-and-mass-immigration-bottom-lines-nz-first

Peters has ruled out a coalition that included the Maori Party in the past. This doesn’t look like changing.

3. Immigration

New Zealand First is committed to a rigorous and strictly applied immigration policy that serves New Zealand’s interests. Immigration should not be used as a source of cheap labour to undermine New Zealanders’ pay and conditions.

http://www.nzfirst.org.nz/immigration

The rest of their Immigration policy sounds strong but is actually vague.

…stopping mass immigration is a bottom line for NZ First working with any future government, Winston Peters says.

“…if mass immigration continued…then we will not go down that path and I’m saying it right now.”

https://www.tvnz.co.nz/one-news/new-zealand/winston-peters-separatism-and-mass-immigration-bottom-lines-nz-first

It’s difficult to know what Winston would insist on for immigration, but he plays the immigration card often to supporters so would have to make some demands.

4. Pike River Re-entry

Winston Peters says Pike River re-entry is bottom line to election deals

Winston Peters says re-entering Pike River mine is a “bottom line” to any election deal made next year.

“I’m making no bones about it, we’ll give these people a fair-go, and yes this is a bottom line, and it shouldn’t have to be,” he said on TV’s Paul Henry show on Wednesday morning.

Any political party seeking New Zealand First’s support to form a government in the 2017 election will have to commit to re-entering the mine.

National want to leave any re-entry decision up to Solid Energy. Andrew Little has supported re-entry but has not absolutely committed Labour to it.

5. Police numbers

Winston Peters demands 1800 extra police

The New Zealand First leader and Northland MP wants the number of police officers increased by 27 percent, in line with Australia’s per capita ratio.

“We’re looking at something like 1800-1900 officers just as a start now to get to a level where we once were, and then build upon that,” he says.

He says it’s a bottom line in any negotiations regarding the formation of the next Government.

So that is five bottom lines that I’m aware of.

? Prime Minister

Arise Sir Winston, Prime Minister of New Zealand?

…here’s another theory that’s been doing the rounds much longer.

It is that Peters will only retire after he has fulfilled his ambition of one day being prime minister. It’s even said to have been put on the able in NZ First’s protracted negotiations to form a government in 1996.

And:

Forget ‘kingmaker’, Winston Peters wants to be the next Prime Minister

That seems to be a claim only on the Paul Henry Show, Peters doesn’t say that. But is that one of his goals?

I don’t think National would agree to a Winston as PM deal, but would Labour and Greens, where none of none of Little, Metiria Turei and James Shaw have any government experience? Peters has already been deputy Prime Minister, from 16 December 1996 to 14 August 1998 (under Jim Bolger).

Are there other Winston/NZ First bottom lines so far?

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?