The dominant narrative about the New Zealand superannuation scheme is that it is unaffordable, and some sort of cutback in entitlements is inevitable. But it's worth looking at the arguments against raising the pension age, as well as the need for a wider debate about age-related welfare.

Back in 2012 when the Labour Party was advocating increasing the age of superannuation entitlement to 67, I wrote a column about the problems with this - see:

Is the proposal to fix the 'intergenerational unfairness' of superannuation actually a Trojan horse?

. Now that National has picked up the baton, it's time for a roundup of what opponents are saying about the latest proposal.


Is the current superannuation scheme really unaffordable?

Plenty of commentators and economists assert that the current superannuation settings are unaffordable. But there are also plenty of voices suggesting otherwise. And in fact, Prime Minister Bill English is one of those, saying on Monday that "You can afford anything if you're willing to make the trade-offs, and it's always a matter of what's fair".

The must-read elaboration on this is today's article by retirement incomes expert, Michael Littlewood, who says that New Zealand's spend on pensions is relatively low: "Even before the recent announcement, our Treasury expected New Zealand to spend, in 40 years, less than the average pension spend of all OECD countries in 2011" - see: Super change: Smart politics bad strategy.

Littlewood argues that National's proposed cuts will not make a huge dent in the eventual cost, and that there's a need for a much bigger debate and discussion about options, rather than just a blanket announcement from the government of the day: "New Zealand has never had a research-led, national discussion on any aspect of the NZS benefit design since it began 119 years ago. Today, we spend more than $11 billion on NZS. The government's decisions aim to side-line the possibility of any debate on whether NZS might be made better today (spoiler alert: it can be)."

Some similar arguments are also made today by Susan St John, who bemoans the lack of debate and consultation by decision-makers: "Government has made it clear however that it doesn't need any of that pointy academic stuff on this or any other issue to do with the ageing of the population" - see: New Zealanders deserve a better response to superannuation problems.

And in fact, is an election campaign period the best time to throw this major change into the mix? Former senior National Cabinet minister Wayne Mapp thinks not, pointing to the "need to have a nationwide consensus on the issue" - see: Masterstroke, manoeuvre or muddle: Bill English's super punt.

Mapp is cynical about National's timing, and says, "Announcing such a policy this close to the election has the effect of hardening the positions of all political parties. The election period is not a time for a careful and considered debate, with the hope that a consensus will emerge. That typically occurs in the year or so after the election."

Chris Trotter expands on whether or not a looming "crisis" really exists, suggesting that: "Immigration flows and the over-65-year-olds remaining in the workforce for longer will take NZ Super over the Baby-Boom hump quite comfortably - after which the demographic stresses will reduce significantly" - see: Abandoning Key's pledge on superannuation 'an act of astonishing political folly'.

Trotter suggests therefore that English's preference for change is merely ideological: "English sees NZ Super as the last remnant of the welfare state's universalist heritage - and he hates it. His whole "social investment" approach to state support reflects his determination to substitute "tightly-targeted" services for the demonstrably more efficient and cost-effective policies of universal entitlement. In other words, English has allowed ideological extremism to undermine his predecessor's phenomenally successful pragmatism". Similarly, see No Right Turn's Opportunity knocks again.


Interestingly, former Reserve Bank economist Michael Reddell says that although he's ideologically opposed to what he sees as an overly generous superannuation scheme, "There just isn't a pressing near-term fiscal issue" and that the country probably can actually continue to afford the current settings - see: Half a hand clap?.

To trade union leader Mike Treen, the proposed rise in the age of eligibility is simply a rightwing pro-business agenda to reduce the size of social spending, and he challenges the "scare stories" from the retirement commission - see: Don't believe the lies about the unaffordability of National Super.

Like Littlewood, Treen argues that "New Zealand's scheme is actually one of the cheapest in the advanced capitalist countries in terms of net cost as a percentage of GDP and will remain so for the foreseeable future." And part of the reason it will remain affordable is because of the increasing productivity of workers: "By 2060 New Zealanders will also be producing two to three times as much per person as we do currently if current average productivity improvements continue. The problem we have is that the benefits of that productivity increase are being captured by the wealthy elite."

For similar arguments, see Philip Ferguson's earlier argument: Pensions and the retirement age: the problem is capitalism, not an aging population. He bemoans that increasing advances in technology once meant that "we were being told that the biggest problem we'd face was how to fill up our soon-to-be vastly expanded leisure time as dramatic increases in productivity would substantially shorten our work week while still delivering a high standard of living."

Intergenerational unfairness

A major problem with National's plan to increase the age of superannuation entitlement is one of generational fairness. This is put mostly starkly on the leftwing blog, No Right Turn, with the new policy summed up as targeting "the same people who have got tertiary fees, student loans, mass unemployment, benefit cuts, health cuts, climate change, and a housing bubble. Meanwhile, the people who received free education and healthcare and tax cuts for Africa while destroying the global climate will laugh all the way to the bank in their bubble-inflated houses. Its pure intergenerational warfare by the Boomer Prime Minister against anyone younger than him" - see: Intergenerational warfare.

This is hardly a fringe argument. Fairfax political editor Tracy Watkins suggests that National is risking a backlash from younger voters: "it could stoke the fires of the war already raging between younger voters and the baby boomers over student loans and skyrocketing house prices. The take out for younger voters from English's announcement is that National doesn't want to alienate the powerful boomer block so is targeting so-called generation rent instead. That's the group that already feel they have been unfairly saddled with student debt and priced out of the housing market by baby boomers relying on property to fund their retirement... Now they're being told they must support the boomers in retirement while knowing they will have to have to work longer themselves" - see: Prime Minister Bill English's super bombshell is a big gamble.

Similarly, the Herald's Claire Trevett says those born after 1972 "will be entitled to feel a bit hard done by, having now copped the brunt of two policies deemed "right for New Zealand." That is the exact same cohort that missed out on universal student allowances and instead got National's student loan scheme in 1992 - complete with interest (until Labour passed the interest-free legislation in 2000). Some are still paying it off while the baby boomers above them got off scot-free - and do so again" - see: Winston Peters was right all along.

The cynical timing of the new policy increasing the unfairness

What is riling a lot of commentators - especially those negatively affected by the change - is the timing of the new policy's implementation. Many argue the change might be acceptable if everyone was having to experience some sort of restraint, but instead it's only those under 45 who are negatively impacted.

Therefore, there are plenty on the right of the spectrum condemning the unfairness of the policy. Act Party MP David Seymour says: "This change won't affect anyone born older than 45, meaning the Prime Minister is protecting baby boomers, while pulling the rug out from under young people.... It's intergenerational theft - cynical political calculus in place of leadership" - see the Herald's Political parties line-up against NZ Super change.

Rightwing commentator Ben Thomas is equally outraged: "now the future is clear: our parents get to retire earlier; the consolidated fund is being picked clean by the locust horde of boomers, leaving only bones when their children arrive at the current retirement age of 65, shortly after having paid off their student loans" - see: Bill English's super shift is a minor triumph - and lights a fuse for the ages.

Economist Shamubeel Eaqub seems to agree: "The timing of the introduction of the superannuation entitlement age seems cynical, or at least politically convenient. The population of 65-year-olds will peak in 2036. Once the bulge of the boomer generation is already over 65, then the entitlement age will increase. So, Generation X will experience the transition and all millennials will face the higher age. This is demographic politics in action" - see: 'Super changes so little, so distant, it's pathetic'.

And the timing issue really will make quite a difference. Tracy Watkins reports today that "Younger workers won't just have to work longer than their baby boomer counterparts under National's pension bombshell - they will be starting their retirement with a $30,000 to $50,000 shortfall in the size of their retirement nest egg" - see: The $30,000-plus boomers' nest egg buried in the Government's pension bombshell.

Other victims of the age increase

There are others who will be disadvantaged by a lift in the age of entitlement. This mostly boils down to issues of class and ethnicity.

The Labour Party, understandably, is making the arguments that working people employed in manual labour will be more affected by having to work longer. Andrew Little has been quoted as saying "Life expectancy may have changed, but bodies wear out pretty much at the same rate as they always have done", and "I spent 20 years of my professional life working with thousands and thousands of New Zealanders who struggle to get to 65 now and get superannuation. The idea that they may be required to work another two years is just not something I support at all" - see the Herald's Political parties line-up against NZ Super change.

This is backed up by the Council of Trade Unions' President Richard Wagstaff, who also argues "This policy is being created in a context of government that doesn't like to spend money on people whether it be health, education or retirement" - see Andrew McMartin's Politicians, unions criticise NZ Super change. See also, Sally Murphy's Super age increase 'unfair' on physical workers.

And even supporters of superannuation reform point to the adverse effects that the rise would have on Maori. The Morgan Foundation's Jess Berentson-Shaw says: "Maori men and women have shorter life spans than Pakeha men and women. They also earn less over their lifetime, and are more likely to work in manual or physical industries - the traditional blue-collar worker. Raise the age of superannuation and those who get hits hardest are those who are least able to accommodate it - because we have a problem with equality in New Zealand" - see: Raising the Age for Superannuation: Fine for Big Ted, but what about Manu?.

Similarly, Rachel Smalley agrees with the age increase, but prefers some sort of exemptions: "we need to understand that lifting the age won't work for everyone. If you're a farmer, if you've worked a labour-intensive job all your life, then working until your late 60s will be a challenge. So it's not 'one size fits all'. But the age does need to move" - see: Retirement age debate clearly shows the problem with politics.

The Maori Party is therefore opposing the age increase, and would not only like to see an exemption for certain ethnic groups, but advocates lowering the eligibility age to 60 for Maori and Pasifika.

This has brought opposition from New Zealand First. Dan Satherley reports that "Winston Peters has rubbished the Māori Party's idea of dropping the retirement age for Maori and Pacific Islanders. Those two groups generally have lower life expectancy than others, but Mr Peters says they should improve their "health" before asking for early retirement. 'You have to look at solutions to that - that is a better diet, a whole range of things, including better health,' says Mr Peters" - see: Proposed super changes 'reasonable and not drastic' - Bill English.

And the retirement commissioner, Dianne Maxwell - who strongly supports the age increase - has also publicly disagreed with any ethnic exemption, saying "My son's half-Samoan - he gets it early or he doesn't, because he's got a palagi mum? You know, what a message to our young Maori and Pacific. What, I'm supposed to tell him he'll get super early because his life expectancy might be shorter?" - see Dan Satherley's Bill's 'balls' deserve applause - Retirement Commissioner.

She adds: "What we're saying to young Maori and Pacific with that is, by the way you've got no chance to change your fate and you've got no ability to change that, so just settle in and expect an early death. When I heard that I got a bit irate."

Ex-Labour Party activist Phil Quin also says Maori Party's two-tier retirement age idea is terrible, describing it as "worse than just impractical and simplistic; it is morally reprehensible."

Superannuation alternatives

Some opponents of the proposed age increase are now suggesting alternative policies to reform the super scheme. They point to other options that are not currently on the table for consideration, such as means-testing, removing the wage-indexing increases to payments, increasing taxation, pre-funding the source of payments, introducing flexible payment options, and even increasing immigration numbers.

Much of this has been ruled out by the National Government. For example, means-testing, according Bill English, "had been settled many years ago.... New Zealand had 30 years of debate over means-testing and came to the conclusion not to do it" - see Isaac Davison's Prime Minister Bill English rules out means-testing or lowering Super payments.

According to Shamubeel Eaqub the alternatives boil down to: 1) Means-tested rather than universal, 2) Entitlement age a fixed portion of life expectancy, and 3) Alternative welfare for those who can't work in old age. You can read his discussion of these here: 'Super changes so little, so distant, it's pathetic'.

Some of these options are also discussed by Jess Berentson-Shaw in Raising the Age for Superannuation: Fine for Big Ted, but what about Manu?. Of particular interest, she adds "We could increase immigration and population size and bring in more skilled workers to pay the bill. This approach increases our diversity, keeps up with the need to have younger workers helping support the elderly".

Isaac Davison also reports the views of the Herald's former economics editor Brian Fallow, who says "raising the age of eligibility alone would not be enough to put a dent in NZ Super's rising costs. The Government would also need to introduce means-testing or change the way Super payments were calculated" - see: Super age lift not enough: experts.

What about the Cullen Fund? Payments to this were suspended after the global financial crisis. According to Gordon Campbell, this is the issue we should be focusing on: "despite the relatively healthy state of the economy, the government seems far more interested in tax cuts this year than in resuming the state's payments to the Cullen Fund superannuation scheme, which remains a crucial means of making pensions more affordable. Suspending those payments in 2009 was inexcusable; not recommencing them until early next decade borders on criminal negligence, and it belies National's claim to being a more responsible steward of the economy. As New Zealand First has pointed out this week, the Cullen Fund would now be worth $50 billion rather than the current $33 billion, if those payments had not been suspended by Bill English in 2009" - see: On National's token National Super age hike.

One of the most informative discussions of alternatives is in Hamish Rutherford's Pre-pay, self fund or means test? Keeping NZ Super involves tough choices. Of particular interest is the information that research in "2014 showed that 26,000 people with total income of more than $70,000 a year claimed NZ Super. The cost was estimated to be $570m a year".

Finally, for more lighthearted takes on the issue, see Sean Scanlon's Farewell, beautiful if irrational superannuation dream, and The Civilian's Government to shorten superannuation period by encouraging New Zealanders to live two years less long.