Editorial: Dunne should make super a bottom line


Flexi-plan allows the PM 'wriggle room' for change.

Peter Dunne. Photo /  Ross Setford
Peter Dunne. Photo / Ross Setford

Peter Dunne says he is confident his "Flexi-super" proposal can be advanced by any third-term National government without compromising John Key's pledge on superannuation. It would, says the United Future leader, help the Prime Minister to "get off his high horse" following his promise six years ago not to raise the age of entitlement. Any dismounting would certainly be in the country's best interests.

Mr Dunne has good reason, therefore, to make the adoption of Flexi-super a bottom line for his support for a National government after next month's election. Such assertiveness may be against his natural instincts, but Mr Key may just need such an imposition to change his ill-advised approach.

Flexi-super provides the Prime Minister with "wriggle room", says Mr Dunne. That is because the core age of entitlement would remain 65. But New Zealanders would be able to take up state superannuation between the ages of 60 and 70 with a varying scale of payments - less for earlier and higher for later.

Several problems would be solved by this, not least the needs of those whose work has involved heavy physical activity. They would be able to retire early, while others would prefer to work longer. Many are already doing the latter, thanks to improved healthcare and increased life expectancy. Flexi-super would introduce a personal choice based on individual circumstance.

There would be some objections. One is that it would widen inequality in old age, with those retiring before 65 receiving the reduced rate for the rest of their life. Another is that it would not necessarily reduce the overall cost of superannuation to taxpayers, and might even increase it. But that would depend on the rates set by the government, as well as any carrots that may be offered. An incentive to work until 70 would, for example, save five years of superannuation costs and add income tax for the same period. This might outweigh the additional payment to them from 70. That money could be used to ensure the inequality for those who take up super at 60 is not too severe.

It is significant that Mr Dunne talks of the Prime Minister seeing wriggle room. A similar scheme, albeit also raising the rate of entitlement from 65 to 67, was suggested by Don Brash four years ago. It was instantly dismissed by the Government, which insisted, in effect, that this was a solution in search of a problem. At least now Mr Key seems more amenable to the introduction of flexibility in a way that would not disturb the core age of entitlement.

At some time, however, reality will have to be faced and that age will have to be increased. NZ Superannuation's cost is projected to rise from 4.4 per cent of national income to 8 per cent by 2050. Raising the age of entitlement would not only reduce the burden of an ageing population on fewer taxpayers - a matter of intergenerational fairness - but reflect increasing longevity. It makes sense, as does Mr Dunne's urge to encourage those able to work well past 65.

The United Future leader says that the next step is to get "broader political support" for Flexi-super. Fair enough. But the most valuable source of support and the catalyst for the enactment of the policy will always be the dominant party in any third-term National government. Mr Dunne's prospects will, obviously, be enhanced if his party's support in Parliament is crucial to National. He may struggle if that is not the case. Either way, he should make the introduction of Flexi-super a condition of his support for any National government. A cogent approach to superannuation demands nothing less.

- NZ Herald

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