Bernard Hickey 's Opinion

Bernard is an economics columnist for the NZ Herald

Bernard Hickey: Fix our Super stitch-up

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The right thing for enlightened and rich 65-year-olds to do is not apply for NZ Super. Photo / Thinkstock
The right thing for enlightened and rich 65-year-olds to do is not apply for NZ Super. Photo / Thinkstock

Imagine the public outrage if it were discovered that more than 80,000 New Zealanders were receiving wages, salaries and investment incomes of more than $6 billion a year, but were also receiving a benefit from the Government.

There would be hours of talkback. Politicians would thump their tubs in rage over the unfairness of beneficiaries receiving their own incomes and drinking heavily from the taxpayer's teat at the same time.

Yet, that is exactly what is happening at the moment with NZ Super and there is not a murmur of protest.

Income figures this week from Statistics NZ show more than 80,000 New Zealanders over the age of 65 receive wages, salaries and investment returns of more than $6.5 billion a year while claiming NZ Super.

The benefits to those 80,000-plus seniors are costing poorer taxpayers at least $1.3 billion a year. Many of these beneficiaries will be retired judges, politicians, chief executives, doctors, diplomats and lawyers who are well able to look after themselves.

So where is the outrage? There's precedent aplenty for cracking down on beneficiaries who are getting more than thought necessary to stay out of poverty.

Our Government has spent the past five years tightening the screws on unemployment, domestic purposes and sickness beneficiaries to get them back to work and off the benefits.

The apparent unfairness of cracking down on poor beneficiaries under the age of 65 and letting millionaires over the age of 65 receive a benefit is not challenged because of the consensus that a universal NZ Super is a good thing.

The current universal scheme is remarkably successful at keeping our elderly out of poverty and is simple to understand and easy to administer. Few want to return to means testing.

So why am I challenging that consensus? This week, for the second time in three years, the Government's official adviser on retirement savings recommended a staged extension of the age of eligibility and a change to a form of indexation that would reduce the long-term cost of NZ Super to the taxpayer.

The National Government slapped down the proposal within 12 hours and insisted the scheme in its current form, with retirement at 65 and the couples' benefit set at 66 per cent of the average wage, was affordable.

That's despite the advice of its own Treasury that the scheme, with no other changes in tax and spending settings, would blow Government net debt out to nearly 200 per cent by 2060.

Young taxpayers may be ignorant now, but they are not dumb in the long run. They will work out they were stitched up in the first two decades of the 2000s and demand means testing.

That hard-fought consensus will degrade in an ugly way through the 2020s and 2030s.

That's a pity because a simple and universal scheme is a good one. It just has to be sustainable.

Meanwhile, the right thing for enlightened and rich 65-year-olds to do is not apply for NZ Super.

Would politicians and Grey Power lobbyists choose to do that? Cue the Tui billboard.

Debate on this article is now closed.

- Herald on Sunday

Bernard Hickey

Bernard is an economics columnist for the NZ Herald

Bernard Hickey is the publisher of Hive News, a Wellington-based political and economic subscription news email service. He also writes for Interest.co.nz and appears regularly on Radio New Zealand, Radio Live, TVNZ and TV3. He has been a financial journalist for 25 years, having worked for Reuters, the Financial Times Group and Fairfax Media.

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