MSD signals review of benefit rates, superannuation

Social Development Minister Anne Tolley. Photo / NZPA / Ross Setford

The Ministry of Social Development has signalled a need to "explore options relating to the age of eligibility" for NZ superannuation, and wants a review of benefit rates to tackle child poverty.

The ministry's briefing to incoming Social Development Minister Anne Tolley also warns of a crackdown on people using family trusts to avoid paying for rest-home care.

The briefing says the number of people receiving NZ super will jump by 14 per cent in the next four years, from 661,600 in June this year to 756,100 by June 2018.

"Various policy options could be considered to address the sustainability and cost of NZ superannuation and to adapt it to reflect contemporary social norms and structures," it says.

"This includes exploring options relating to the age of eligibility, the unit of entitlement and the basis of indexation."

Its advice may be ignored by the Government, which promised when it took office in 2008 that it would not change the qualifying age.

The unit of entitlement is currently each individual aged 65 and over, but there are separate rates for couples where both are 65-plus and where only one is 65 and a partner is below that age.

On rest-home care, the briefing suggests "reviewing the use of trusts and benefit eligibility".

"The growing use of trusts is making it more difficult to administer some benefits, particularly the Residential Care Subsidy [for rest-homes]," it says.

On poverty, it says poverty rates have largely returned to pre-recession levels, but "for some groups housing costs are now very high and household incomes have remained broadly static in real terms for beneficiaries while NZ super, average wages and median household income are all rising."

A graph in the briefing paper shows that the income of a sole-parent beneficiary with one child has dropped by almost 20 per cent in real terms since 1983, while the net average ordinary-time wage has risen in real terms over the same period by more than 30 per cent.

"In light of the short and long-term costs of child poverty to individuals and communities and relatively flat trend lines in levels of child poverty and hardship, it is important to continue to make progress in this area," it says.

"Alleviating hardship for children in the 'here-and-now' is an investment to improve life chances and child wellbeing in other domains, and reduces the potential harm and costs (including economic costs) to society.

"Within this multi-pronged approach, options could be explored to review the adequacy of the existing transfer payments, notably in the case of families with children."

However the ministry also says in the paper that it needs to cut costs by $240 million over the next four years to meet Budget settings.

"This project is expected to help address the estimated financial gap of $60 million by 2017-18 indicated in the current four-year plan."