In the September 2003 issue of Grey Power Lifestyle Quarterly, there were two items which gave a totally misleading impression of the National Party’s policy on New Zealand Superannuation.
One was a letter to the editor by Gordon Currie, President of Nelson Grey Power. Under the heading “Brash View”, he claimed that “once again an MP is prepared to commit political suicide by pushing his view on the future of New Zealand Superannuation! Stating his own interpretation on the outlook of the possibility of there being no Super available in the near future, he immediately fixes that by raising the age of eligibility to 70 years, 75 or even 80!”
The second was an article by Don Robertson, who refers to “worrying noises coming from Dr Brash, the National Party spokesman. No Super until you are 70 years old. Reducing the amount of payment. Re-igniting the whole sustainability debate again.”
I sought the agreement of your President, Mr Graham Stairmand, to publish a correction following a number of approaches from retired members of the public, understandably concerned that their Super would be in jeopardy when a National Government returns to power.
At the last election, the National Party pledged to maintain New Zealand Super on the present basis if returned to power, namely 65% of the average wage at age 65 for a married couple.
The National Party remains absolutely committed to this for all those who are now retired, and for all those getting anywhere close to retirement.
But in anything as important as retirement income, honesty is absolutely imperative. Both major political parties have a record of being less than completely honest with the public about superannuation – which is Parliamentary language for saying that both major political parties told absolute whoppers about superannuation in the late eighties and early nineties. I do not plan to repeat that.
The facts are these. At present, one New Zealander in eight is over 65, and life expectancy at birth is 78. By 2040, one New Zealander in four will be over 65, and life expectancy at birth will be 84. On the basis of present policies, that means that the cost of New Zealand Super will roughly double relative to the size of the economy, and much the same will happen to the cost of government-funded healthcare (of which older New Zealanders are big consumers).
To put figures on this, ageing will take the cost of New Zealand Super and government-funded healthcare from about 11% of GDP now to about 21% of GDP in 2040.
Funding that would require a very big increase in taxation – doubling the rate of GST, from 12.5% to 25%, would not be sufficient. The risk is that those who would be faced with that big increase in taxation and who could most easily avoid it by, say, going to Australia (where the taxpayer-funded retirement income scheme is less generous and is subject to tough income and asset testing) would up and leave – creating real problems about how to finance both Super and healthcare.
This is not an immediate issue. Indeed, for the next 10 or 15 years there is really not an issue at all. But in 20 years time the issue will become more significant, and it will get more significant as time goes by.
Labour has set up the Cullen Fund to ease the problem in 20 years’ time. Superficially, it sounds like a good idea. But apart from all the investment risks involved in the Fund, the biggest risk is that it is gradually conning people into believing that it has “solved” the sustainability issue. It most assuredly has not.
If, and it is a big “if”, the Cullen Fund earns the high yields originally expected (11% annually on shares and 6% annually on bonds), it will cover only about 14% of the cost of New Zealand Super, or less than 7% of the combined cost of New Zealand Super and government-funded healthcare. Some solution!
The reality is that, at some stage in the future, as the Retirement Commissioner said last year, it is inevitable that a future government will need to raise the age of eligibility for New Zealand Super. Dr Cullen acknowledged as much in a press statement late in 2000 when, in commenting on an International Monetary Fund report on New Zealand, he said that the Government recognised “that changes in life expectancy and medical science may lead some future government to consider raising the age (of eligibility) above 65”.
My guess is that everybody who is now over the age of 50, perhaps even over the age of 45, will be able to draw New Zealand Super at the age of 65. But will those who are now 25 or 30 be able to do that? I seriously doubt it.
But that should not be a matter for concern. Young adults have decades ahead of them to contemplate retiring a few years later than we now do, and will be enjoying longer life and better health than we do now. In the meantime, your Super is perfectly safe with National.
Copyright © 2024 Don Brash.