Editorial: Super plan too little, too slow and too late

Diana Crossan, Retirement Commissioner

Opinion

The Retirement Commissioner's latest triennial review of New Zealand Superannuation arrives exactly 65 years after World War II ended.

The first babies conceived in two prolific decades from the end of the war to the arrival of the pill will be applying for the pension next year.

With rising life expectancy they have every chance of receiving fortnightly cheques for 20 years, provided by a smaller generation of working taxpayers.

To meet this well-documented problem the commissioner, Diana Crossan, proposes a minimal and glacial increase in the age of eligibility. If her recommendation yesterday is adopted, the age would be lifted from 65 to 67 in annual steps from 2020.

It would not reach 67 until 2033 when those born in 1966 will be that age. Thus it would take effect just as the demographic bubble passes its peak.

Why so late? On the face of it the commissioner's schedule yesterday might be a relief to John Key who has timidly ruled out raising the age of eligibility while he is Prime Minister.

If he is still in office in 2020 he will have won four elections in succession, a feat achieved only once since the war, by Sir Keith Holyoake. The law of averages suggests raising the age will be the next prime minister's problem.

But Diana Crossan also urges that the decision be made soon, for the very good reason that personal retirement planning needs to begin as early as possible. New Zealand Superannuation, she points out, is the basis of everyone's plan.

"Now is the time for decisions," she says. "It will be up to the politicians to either embrace this approach or provide the public with their alternative ways of managing the future costs of retirement income."

Her words are a challenge we should not allow political leaders to duck. If Mr Key remains obdurate on eligibility he must propose another way to get taxpayers over the hump. Labour might take refuge in the last Government's initiatives, the "Cullen fund" that was started from Budget surpluses and "Kiwisaver" incentives.

Almost certainly Labour will go into the election next year promising to resume contributions to the fund, even in the absence of a surplus, and quite possibly to make Kiwisaver compulsory.

The commissioner supports neither of those solutions. She suggests improvements to Kiwisaver but believes compulsion would be detrimental to other forms of saving and could possibly undermine the principle that everyone should get NZ Superannuation regardless of independent wealth.

That principle, "universality", is at odds with all other benefits provided from taxation, and the commissioner finds it "almost unique" among tax-funded retirement incomes around the world. But she strongly believes in it.

A universal individual entitlement is "worth defending and preserving", she says, because it treats women equally and does not penalise personal responsibility. It is also simple to administer and cost-effective. She proposes improvements to its universality and individual entitlement, particularly for superannuitants whose partners are still earning.

The commissioner notes that older New Zealanders enjoy a higher average living standard than the population overall and that one in three pensioners receive more than half their income from other sources.

As their number increases over the next 20 years the burden on the taxpaying generation will grow. The ageing generation could ease the burden by working to 70. The Retirement Commissioner's proposed age adjustment would be too little, too slow and too late.