In 1984 when the fourth Labour Government introduced its now infamous tax surcharge of 25 cents in the dollar on
additional income above $100 a week for those in receipt of National Superannuation, it was claimed that about only a
quarter of superannuitants would be affected – the actual figure turned out to be 23% - and that very, very few of them
would lose the equivalent of all their National Superannuation. In the heat of the time, that claim was largely
disbelieved as much greater numbers of superannuitants, thinking their retirement income would be more than it actually
was, believed they had been adversely affected and reacted angrily accordingly.
Then, there were just under 400,000 National Superannuitants, accounting for 12% of the population. National immediately
promised to repeal Labour’s surcharge, only to replace it with its own version in 1991. Superannuitants’ outrage was
predictable and immediate, leading not only to the establishment of Greypower but also contributed to the birth of New
Zealand First to fight for the abolition of the surcharge. That eventually occurred in 1997, leaving both the Labour and
National Parties of the time with massive credibility scars for their handling of the issue over the years.
Since then, universal entitlement to New Zealand Superannuation (as it is now known) has been restored and no major
political party has been brave (or foolish) enough to tamper with that. National’s commitment since 2017 to gradually
increase the age of entitlement to 67 by 2037 is perhaps the biggest potential move, but it is timid by the standards of
Labour’s 1984 and National’s 1991 changes. Now that the current government has resumed contributions to the so-called
Cullen Fund to future proof superannuation payments from 2025, an uneasy consensus appears to reign on superannuation
policy.
In the meantime, the raw numbers of those in receipt of New Zealand Superannuation have risen around 95% since 1984 to
just under 770,000, and their proportion of the population is up by a third to around 16%. Perhaps it was that growth
and projections that it will increase in the future to around 1,430,000 New Zealand superannuitants by 2050, around 21%
of the total projected population then, that has influenced the University of Auckland’s Retirement Policy and Research
Centre to call for a tax surcharge on higher income earners receiving superannuation, to cover the cost of their
superannuation payments.
Whatever economic and equity considerations there might be in favour of a proposal like this, political reality means it
or anything like it is unlikely to fly. Too many political parties and politicians have been scared by the
superannuation experience of the last couple of decades to want to go anywhere what looks like a reintroduction of the
discredited approach of the 1980s and 1990s. Even though most of the generation of politicians involved at that time has
moved on, the legacy of the sense of betrayal and antagonism engendered by those earlier changes remains.
Importantly, it was often not the superannuitants themselves who felt most aggrieved, but rather those approaching
superannuation who saw their potential future income – and thus their intended retirement standard of living – being
reduced, and their children, worried about how their parents might cope. It would be just the same today.
The only way change of this type could be progressed at this time would be through some form of multi-party agreement,
but the chances of that occurring are zero. For a start, no party would want to be seen to initiating a move to tax
superannuitants more, and few others would be keen to join them. There was a brief accord between National and Labour
before the 1993 election which quickly fell apart because both saw richer pickings in continuing to attack the other
over their earlier “treachery and betrayal”. There is no reason to think it would be any different today.
Moreover, if ever there was a cause to revitalise the flagging fortunes of New Zealand First, this would be it, and
while Labour, and it appears National too, are prepared to cuddle up to them as the price of gaining political office,
neither is so generous as to gift them a whole generation of voters in this way. The rising numbers of older New
Zealanders presents enough of a challenge for both Labour and National anyway, and while both are steadily moving to
recapture that ground, neither can afford to alienate, for whatever reason, that group of voters on an issue as basic as
superannuation.
Now, while all this might appear an overly cynical assessment, it is nevertheless a political reality. It is not to say,
however, that the preservation of vested interests means that future discussions of superannuation policy are off the
table, but, rather, that if those discussions are to have credibility, they need to be couched in such a way to gain
broad political support.
Enhancing and promoting Kiwisaver may well a prove a starting point towards some common ground. Today, over 2,800,000
New Zealanders are enrolled in Kiwisaver and that number is increasing steadily. Making Kiwisaver contributions
compulsory for all those in the work force would allow for a more considered approach to be taken to New Zealand
Superannuation over time. Backing that up with an annuities policy whereby Kiwisavers could manage their investment on a
regular income stream basis once their funds mature at the age of 65, would mean that the absolute reliance on New
Zealand Superannuation as the major retirement income source for so many would steadily reduce over the years, and that
the climate for considering its long term future would be more congenial. There is scope for Labour and National to work
together on this ground, if they are of a genuine mind to secure a stable retirement income scene for the future.
New Zealand Superannuation is but one – albeit a very large – part of the retirement income mosaic. The mistake we have
made for more than a generation now has been to treat it as the whole picture. It is time to learn from that, and to
move forward.