Every three years, the Retirement Commissioner must review New Zealand's retirement income policies.
That's not all relevant retirement income policies, just those that the current government says the Retirement Commissioner must look at.
And that's the first problem with the current review process. The government should not be setting the agenda. Also, every three years is probably too often.
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The acting Retirement Commissioner ('acting' is another problem with the 2019 Review) has just released his report and it's a bit like the curate's egg – parts of it are good.
First, it's a good thing to return to a real report and away from 2016's experiment with online engagement, no matter how many hits the last exercise garnered.
Secondly, the 2019 Review dials back some of the rhetoric in past reports about the sustainability of New Zealand Superannuation (NZS).
That's a good thing. NZS is sustainable in the long-term and, even after another 40 years, our Treasury expects NZS in its current form to be costing less than most OECD countries spend on pensions today.
Somehow, they are managing that cost today and so there is no reason to suppose we can't deal with a comparatively smaller real cost in 40 years' time.
However, the 2019 Review then kicks the NZS ball firmly into touch because it missed a vital next step.
Yes, NZS does not need to change today on cost grounds but does that mean it shouldn't change? Not even a bit of it.
NZS has arrived in its 2020 shape almost by accident and mostly because of 45 years of political push-me, pull-you.
There is a bunch of things we need to discuss and we need an evidence-led process to drive that discussion.
The 2019 Review should have taken the opportunity to raise all those issues and lay out the data we will need to inform that discussion.
For a minor example, why do we pay NZS to overseas tax residents without deducting New Zealand tax? Again, why precisely do we distinguish between a 'married' couple living together and two 'single' people who share accommodation?
There are 13 similar benefit design issues that need an evidence-led, national discussion, even including the state pension age, but there was no indication of this in the Review. At some point, New Zealand will need to have that discussion.
Cost is obviously an important issue but cost should not drive benefit design decisions.
An 'ideal' NZS might actually cost more than the present design and that extra might be acceptable to taxpayers (but may not).
How much NZS costs should be the last step in the benefit design process, not the first, as the 2019 Review has effectively decided.
Most of the 2019 Review's recommendations (15 of 19) were about KiwiSaver, most of them to make sure more people are saving more through KiwiSaver and calling for even more taxpayers' subsidies.
But here's the thing – we taxpayers have spent more than $10 billion in tax subsidies and 'credits' since KiwiSaver started in 2007 and we will be spending another $840 million or so in the current year.
Despite the more than $57 billion in KiwiSaver accounts, we do not know whether KiwiSaver is 'working' – are New Zealanders saving more as a result of KiwiSaver or are they shifting existing savings into the tax-favoured accounts?
No-one can answer that question because we have no current data on households' financial behaviour. New Zealand tried to find out through the 2002-2010 Survey of Family Income and Employment.
What we discovered then was that:
- New Zealanders were probably slightly over-saving for retirement before KiwiSaver started;
- Only about one-third of KiwiSaver contributions might be 'new savings';
- KiwiSaver members seemed to have accumulated less net-wealth than similar non-members.
So, before we even think of spending more taxpayers' money on KiwiSaver, or encouraging KiwiSavers to save more, the 2019 Review should have wondered whether what we have is 'working'.
I am confident there is no evidence to suggest that it is; that New Zealanders are saving more than before or without KiwiSaver.
They may be but we just don't know and we should at least try to find out. Even asking that question in the 2019 Review would have been progress.
I do agree with the 2019 Review that the review process itself needs changing.
Is that because past reviews (and, perhaps this one?) haven't worked as they should? I think that's right but simply changing the political master from the Ministry of Business Innovation and Employment to a 'partnership' of MBIE and the Ministry of Social Development isn't an improvement but more a recipe for turf-protection and obfuscation.
New Zealand needs a bolder suggestion
What about having the Retirement Commissioner reporting directly to Parliament? With the ability to set the terms of the six-yearly review? With an independently fixed budget? Perhaps, even more than one Retirement Commissioner, more like the Productivity Commission?
The 2019 Review is largely a lost opportunity – some positive aspects but mostly evidence-free recommendations on KiwiSaver (15 of 19), much like past reviews.
Michael Littlewood is a retirement policy commentator and the former co-director of the Retirement Policy and Research Centre at the University of Auckland.