Super - political football kicked into touch

Tinkering with provision for the twilight years has been left out of electioneering this time. Philip Macalister examines the parties' positions.

Superannuation is potentially one of the defining policy issues between the parties, but it has been a sleeper this election.

That has its own pluses and minuses.

On the credit side of the ledger, super is not the political football it normally is at this point in an electoral cycle.

On the debit side, a wide range of policies is on offer, none of which are being scrutinised.

This has prompted a group of "experts" headed by Michael Littlewood to produce a paper this week criticising the Labour policy.

The policy options range from the detailed to the devoid of detail. They also cover the gamut from compulsory individual savings to the fully state-funded universal entitlement option.

At one end of the spectrum are National and Act. They are not quite singing to the same tune, but then you would hardly expect Jenny Shipley and Rodney Hide to form a choir.

National has gone into this campaign without an election policy on super. Instead, it has kicked the subject to touch and established the Super 2000 Taskforce chaired by former Council of Trade Unions boss Angela Foulkes.

The taskforce is made up of people representing business and the community, rather than politicians, and it is charged with developing a superannuation policy by November next year.

The other plank of the National policy is that it will continue with indexing New Zealand Superannuation to the consumer price index, while reducing the wage floor to help ensure that the scheme is fair and financially sustainable for the future.

Act, the self-styled revolutionary party that is strong on ideas, also has not taken a policy into this election. Its position represents a major turnaround on three years ago. Back then it vigorously argued for compulsory individual savings accounts (like New Zealand First). But because 92 per cent of the electorate rejected the compulsory scheme put up in a referendum two years ago Act has shelved the idea.

Finance spokesman Rodney Hide says Act wants to work towards consensus, as opposed to pushing what it thinks is the right answer.

The Alliance also takes a "let's-not-make-big-changes" approach to super. Leader Jim Anderton believes the current model is good and sustainable.

The key planks in the Alliance policy are raising the level of NZ Super, which National cut last year, and restoring the accord, the agreement signed by most parties in the early 1990s in which they said they would find a mutually acceptable super solution.

NZ First is continuing with the compulsory approach and has revamped the policy which the electorate has already energetically canned.

Labour has the most comprehensive policy on offer, and proposes quite a different approach to superannuation.

It wants to encourage voluntary savings by introducing tax incentives, and it wants to shift funding of New Zealand Superannuation from one funded by current tax receipts to one funded at least in part by government investment.

The key to this is putting 8c of every income tax dollar into a consolidated scheme which is run by a "board of guardians" on a commercial basis at arm's length from the Government.

As this is the most detailed policy on offer, and it seeks the most change, it is also the one which has attracted the most attention.

This week a group of eight superannuation experts released a report which claimed the policy was fundamentally flawed.

"Labour's funding proposals are no more than economic window dressing. Putting money into a fund tagged to cover future superannuation payments only robs Peter to pay Paul," says group spokesman and Planit Services director Michael Littlewood.

"It is a smoke and mirrors trick that does nothing to address the real issue - enhancing our economic growth."

BT Funds Management chief investment officer Craig Stobo describes the policy as a fix to a Government-created fiscal problem, as opposed to something designed to deal with private provision issues.

Labour acknowledges the Government will have a budgetary shortfall in 15-20 years' time, and the only ways it will have of funding superannuation will be through higher taxes, lower spending or debt financing.

Labour hopes to solve the fiscal problem by putting aside money now and having it professionally managed.

While the parties' policies are diverse, they also have some common themes. No party, not even Act, is prepared to push for means testing on NZ Super.

Part of the reasoning here is that the superannuation surcharge was handed so poorly by previous administrations, and left so much ill-feeling amongst the pensioner voting block, that it has become a no-go area.

This is despite the recommendation from a Government-appointed taskforce, the Periodic Review Group, that there should be some linkage between the publicly provided pension and people's private savings.

Also, Labour, the Alliance and NZ First want to restore the level of NZ Super to where it was before the National cuts last year.

AMP New Zealand general manager John Drabble says for the past eight years politicians have been talking about superannuation and have established various taskforces to look at the problem, but they are no closer to finding a solution.

He says the window of opportunity to put in place a sustainable and fair system is diminishing rapidly. "There is only a brief time frame in which we can take corrective action. After 2020 we'll be reacting to circumstances and our options will be far more limited.

"The longer politicians defer decisions around superannuation, the greater the likelihood that drastic measures will be implemented to contain the rising cost of NZ Super in the future."

Mr Drabble says politicians are fixing the problem so people have to do it for themselves.

"Regardless of whether the parties debating superannuation reach a consensus or not, the issue of planning for retirement is clearly one which affects every New Zealander, not just at an intellectual level, but in practical terms.

"Those people who can afford to save, even small amounts, must aim to get into a savings habit if they want to ensure they have the life they want when they retire. Anything is better than nothing - people just need to begin into the habit of saving."

* Philip Macalister edits SuperTalk (www.supertalk.co.nz) a website devoted to discussing and analysing superannuation issues.