COMMENT: We have more than a highly successful government retirement programme in New Zealand. Sir Robert Muldoon's National Superannuation Scheme is a world leader. NZ Superannuation, as it is now called, provides all New Zealanders with retirement income security and is vastly superior to compulsory or privatised superannuation for these reasons.
Firstly, it has eliminated poverty if not hardship in old age, something the market does not do. Secondly, it insulates all superannuitants against the risks of inflation and stock market downturns or collapses. A future resurgence of inflation can never be ruled out. And capital markets do not always work well.
Thirdly, governments can manage superannuation schemes far more effectively and efficiently the private sector. NZ Super's universality ensures everyone is covered in retirement. Privatised superannuation does not cover those outside the workforce.
Governments through large-scale computerisation are highly efficient in managing superannuation schemes. The private sector, which charges fees, cannot match the low administrative costs - typically below 1 per cent of the budget.
Fourthly, because NZ Super is administered by the Government it is highly responsive to its "clients", the thousands of New Zealanders who depend on it for retirement income. The Government's recent payment to superannuitants for winter heating costs illustrates its responsiveness. Such ameliorative public action is foreign to the market.
Finally, NZ Super achieves a modicum of national income redistribution which ensures even our least fortunate - whose number is growing - receive a basic level of subsistence. Privatised superannuation would only increase New Zealand's already grotesque inequality.
But the greatest shortcoming of privatised superannuation, and this applies equally to Kiwisaver, is how will future retirees support themselves who, either through profligacy, inflation or stock market collapse - outlive their savings? The result would be widespread destitution.
Despite its success, critics unrelentingly charge that NZ Super is "generous and unsustainable". It is neither.
It is tied to a modest proportion (66 per cent) of the average wage of a low wage nation. Those solely dependent on NZ Super are reduced to a fairly frugal, spartan existence.
The greatest criticism levelled at NZ Super is the impending demographic bulge will make it unsustainable in its present form. Again, the facts do not support the claim.
In the 1980s critics claimed Muldoon's "generous" National Superannuation would become unaffordable by 2010. The gross cost in 2010 was $10 billion, or 4 per cent of GDP. The net (after tax) cost was 3.7 per cent of GDP. It proved very affordable.
Treasury projects NZ Super's gross cost in present form will peak at 7 per cent of GDP by 2050, then decline. But some perspective is required. The average cost of public pensions across the EU is 12.9 per cent of GDP. Accordingly, the EU nations are faced with three grim choices: Raise the retirement age, increase taxes or reduce pensions.
Fortunately, New Zealand's situation is different. As superannuation expert Michael Littlewood recently wrote, the critical factor in NZ Super's sustainability will be our future economic performance.
Treasury's projections, are based on the continuation of New Zealand's suboptimal economic performance. New Zealand is an under-developed, low national income, low wage nation in relative economic decline.
The Retirement Commissioner, Diane Maxwell, has cautioned economic growth will not suffice. She is correct. The solution is economic development. The greater the gap between our national income and population by 2050 the higher New Zealand's living standards will be, including for all superannuitants.
Achieving rich-nation status will require the appropriate development institutions, a permanent immigration stop and a massive expansion of our productive sector. Like Singapore and the Nordic nations we must become an export powerhouse. With rich-nation status New Zealand will have the best of everything, including generous superannuation.
• John H. Gascoigne lives in Cambridge.