All Aboard the Superannuation Merry-Go-Round Once More
DUNNE SPEAKS
From the mid 1980s until the late 1990s the one certainty about superannuation policy in New Zealand was its
uncertainty. Every government played around with it, to the detriment not just of superannuitants of the time, but also
of those approaching retirement and hoping to be able to plan their futures with some certainty. National promised to
repeal Labour’s infamous 1984 surcharge, only to replace it with something just as draconian in 1991. That was gradually
watered down during the 1990s, and a multiparty accord established, which Labour then walked out of when it had
succeeded in taking superannuation off the political agenda and Labour found it no longer had a weapon to beat the
government with. Then National reduced the relativity of the rate of superannuation to the average ordinary-time wage,
which was subsequently overturned by Labour and the current formula arrived at. A period of superannuation peace and
stability was to ensue for about fifteen years.
It has to be said that none of us who were involved in superannuation politics of the time covered ourselves with any
glory and that at least one generation of New Zealanders was given no reason to trust politicians on superannuation
policy. It is probably true that Sir Robert Muldoon’s overly-generous 1975 election bribe of 60% of the average wage at
age 60, developed as a simple reaction to the Kirk Government’s much more complicated contributory 1974 scheme which
would have taken until 2014 to reach full maturity, was to blame for all this, but that was of little consolation at the
time, or now. Superannuitants simply felt betrayed.
Over the last 15 years, a measure of stability has returned, and retirees, near-retirees and their families have been
able to plan their futures with a measure of certainty. All of which raises interesting questions about National’s
surprise announcement this week, that as a response to the ageing population, it plans to shift the age of entitlement
from 65 to 67 between the years 2037 and 2040, affecting everyone born after the start of 1974. In an eerie throwback
that suggests we could be about to get on the superannuation merry-go-round all over again, Labour now finds it
convenient to renege on the raising the age policy it promoted at the last two elections.
It could be said that National has learned a lesson from the past with the long time-frame it has for the changes it is
now proposing , although those affected, now in their early 40s and younger, may see it differently, having just paid
off their student loans, and now raising their young families and meeting the mortgage costs. They probably will not
feel downright betrayed as their grandparents did in the 1980s and 1990s, but they most likely will feel somewhat
cheated.
The bigger risk is that National’s signalled intent – that is all it is at this stage, with eight general elections due
before it takes effect in 2040 – sets off a further round superannuation uncertainty, the last thing anyone wants or
deserves. And that raises the wider question about whether age adjustments are the best way to manage future
superannuation policy. While it is true people are living – and working – longer, it is also true that the advent of
Kiwisaver in 2007 has enabled many people to build up large retirement nest eggs, making them less reliant on New
Zealand Superannuation in the future. At the same time, the focus now comes on the demographics of those with short
lives post about 60, and how poorly they are catered for at present, In short, despite having paid their taxes all their
lives, there are many who die worn out and exhausted before ever reaching 65, or shortly thereafter. And they get no, or
very little, superannuation.
That is why UnitedFuture’s focus is on Flexisuper (the option to take a reduced rate of superannuation from the age of
60 if one wishes, or a higher rate if uptake is delayed to age 70) and compulsory Kiwisaver, rather than adjusting the
basic age of entitlement from 65. That package addresses the issue of those worn out at 60, and also sends a clear
signal about the value of long-term personal savings, and less reliance on the state pension. But, most importantly, it
places control of retirement choices and income back in the hands of the individual, not the state. Under Flexisuper and
compulsory Kiwisaver, people will be able to back their own choices and know they will not be interfered with by
governments changing their minds.
The one constant in the superannuation debate of the last couple of generations has been that people have craved
certainty. They opted for Muldoon’s unrealistic “too good to be true” scheme in 1975 because it was simpler and more
immediate than the Kirk scheme. They berated Labour and National governments in the 1980s and 1990s for “mucking up”
their retirement plans. Now, when the superannuation spectre is being raised again, many may well see it as too far in
the future to get exercised about immediately. An irritant, rather than a body blow, but certainly an opportunity for
people to take control of their own retirement destiny, regardless of what the state might impose.
ends