Labour on superannuation

December 5th, 2013 at 12:00 pm by David Farrar

The Herald reports:

would raise the age of eligibility for New Zealand to 67, make KiwiSaver compulsory for employees and increase the KiwiSaver contribution rate if voted into power.

Deputy Labour leader David Parker told members of the superannuation industry his party was not afraid to tackle the age of eligibility issue despite it being politically challenging.

“I am willing to deal with the age of eligibility for superannuation. This is not populist politics.”

Parker said the Census data released this week backed its decision. He pointed to the number of people in the 50 to 59 age group increasing by 22 per cent since 2006 to 989,000.

“Although the total population increased, fewer people are under 15 than in 2006 and this reinforces the need to address superannuation.”

Paying for superannuation cost more than all benefits combined and within two years he expected it to exceed the annual spend on education. Labour has proposed raising the age of eligibility for New Zealand Superannuation from 2020 increasing it two months at a time to reach 67 by 2026.

I back raising the age. It is worth noting that in the fine print of Labour’s policy is that they are not so much increasing the age, as applying a means test for those aged 65 and 66. So if you stop working at 65 and have few investments you will still get super.

The party would also make KiwiSaver compulsory for those in employment. It would be optional for the self-employed and those without an income.

This means a take home pay cut for those who can least afford it. If you make KiwiSaver compulsory, then you should over time cut the level of NZ Super to recognise that everyone will have private savings.

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46 Responses to “Labour on superannuation”

  1. MH (558 comments) says:

    as every year goes by, I blame my parents for putting me in this 50 – 59 age group. And post colonial representation.

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  2. Adolf Fiinkensein (2,667 comments) says:

    At last someone recognizes the wisdom of means testing – even if it IS the party of fools.

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  3. rouppe (852 comments) says:

    Always the cost of Superannuation is rising. Sounds like it will always rise as variously described “tsunami’s” and “floods” of baby boomers retire.

    I find it curious that no-one models when they start dying, and when the draw then eases. Apparently we are all suddenly going to live to 100… Or more…

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  4. Manolo (12,617 comments) says:

    Meanwhile Smile-and-wave continues to repeat that age limit will not be raised under his watch.

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  5. Nigel Kearney (747 comments) says:

    40-49 is worse than 50-59. I expect to pay for the retirement of everyone older than me and get nothing myself. Though I do have more income earning years to prepare for that eventuality.

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  6. big bruv (12,327 comments) says:

    “So if you stop working at 65 and have few investments you will still get super.”

    Once again we reward the losers in our society. Those who have done nothing in their entire miserable life to take the burden of paying for themselves off other hard working tax payers.

    I do hope that Labour make this a big issue, the words “means test” have always spelt out political death.

    I am bloody sure that any hard working bloke will be thrilled to learn that if he does the right thing, looks after himself and his family he will have to work two years longer than the parasites and losers who have done nothing but bludge off the state.

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  7. Kimble (4,092 comments) says:

    This means a take home pay cut for those who can least afford it.

    Compulsory kiwisaver combined with a slightly low tax rate?

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  8. Kimble (4,092 comments) says:

    Meanwhile Smile-and-wave continues to repeat that age limit will not be raised under his watch.

    Which was taking the issue off the table at the time.

    If he had talked about the exact same policy Labour is proposing, there is ZERO chance Labour would have supported it.

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  9. Albert_Ross (172 comments) says:

    At last someone recognizes the wisdom of means testing – even if it IS the party of fools

    Adolf, I know you hate the idea of giving taxpayers’ money to rich people who don’t need it. But means testing has many downsides. It requires extensive, intrusive and increasingly complex monitoring, administrative and enforcement arrangements, it incentivises people to pay accountants and lawyers to find ways of arranging their finances to avoid the means test, and it punishes people who work and save. The economic damage from all this may well outweigh any cost savings you get.

    These issues could be addressed to a certain extent (as could big bruv’s concern at 12:15) by making saving compulsory, and then means testing against these savings only. So any voluntary saving or income from working wouldn’t be caught.

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  10. dime (8,746 comments) says:

    So, under labour, Dime will no doubt be slapped with an envy tax. 40%?

    Then Dime will be forced to join “kiwisaver”. urgh

    This is at a time when you have people like peters saying “we will buy back the power companies using kiwisaver funds”.

    i flat out dont trust politicians enough to be in kiwisaver. what are the chances of Dime getting through another 30 years without some lowlife scumbag MP nationalising kiwisaver? fuck that

    as for super itself. i dont expect a penny. i just expect to pay tax til the day that i die to keep supporting losers.

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  11. tas (527 comments) says:

    means testing super = tax on retirement savings = disincentive to save

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  12. big bruv (12,327 comments) says:

    What a great country we live in.

    We get a free education, if you waste that education there is no need to worry.

    We will provide you with an income.
    We will provide you with a home.
    We will provide you with food.
    We will provide you with booze.
    We will provide you with fags.
    We will pay for any kids you may have and not expect anything in return.
    We will pay for your tats to be removed.

    We are looking at feeding your kids for you
    We are looking at giving you the pension well before those who have worked all their lives for it.
    We are looking at giving you “working for other peoples families” even though you have never had a job.

    Why the hell would anybody ever bother working?????

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  13. Nukuleka (77 comments) says:

    Too few young people to support the ageing population? Easily fixed. Enforce the abortion laws so that more children are given the opportunity to live!

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  14. Adolf Fiinkensein (2,667 comments) says:

    Albert_Ross

    I’m afraid you are talking crap.

    It requires extensive, intrusive and increasingly complex monitoring, administrative and enforcement arrangements,

    I live in Australia where gummint super is means tested. Roughly half my pension comes from NZ and the remainder from Australia. I can assure you there is no extensive, intrusive and increasingly complex monitoring. The original application was done on line and took only ten minutes. I report online every fortnight any income earned and for every dollar over $250 my Australian pension is reduced by $0.25. The NZ portion of my pension is paid directly into my bank account here.

    Australians generally regard universal gummint superannuation, paid to millionaires. as confirmation that Kiwis are fucked in the head.

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  15. Odakyu-sen (248 comments) says:

    “Australians generally regard universal gummint superannuation, paid to millionaires. as confirmation that Kiwis are fucked in the head.”

    Maybe the millionaires have paid a lot of income tax/property tax/consumption tax.

    In principle, a society should reward good behavior and punish bad behavior. If a man has worked hard all his life, paid his taxes, raised a family to be contributing citizens to society, why would you means test him and withhold his Super while paying it out to a feckless layabout who has been a drain on society all his life?

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  16. Alan (908 comments) says:

    As long as no one screws with what I can spend the money on at the end, I’m pretty much ok with this. It’s a move towards the Australian model which seems to work better than ours.

    Universal superannuation is a nonsense. We need to recognise Superannuation for what it is; it’s a benefit.

    If you means test without compulsory kiwisaver (which of course needs to be much more open in terms of self management) then you create a moral hazard situation.

    I was polled a couple of weeks ago on a potential policy doc, that looks suspiciously like this. The only difference was the policy was going to compel people to purchase an annuity which would double the state pension, only then would they be free to spend their own money. Glad to see this has been dropped.

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  17. Kimble (4,092 comments) says:

    means testing super = tax on retirement savings = disincentive to save

    Those things arent equal.

    The disincentive to save will depend on the level of super versus peoples expected level of savings.

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  18. Alan (908 comments) says:

    “Maybe the millionaires have paid a lot of income tax/property tax/consumption tax.”

    Great, so let’s extend that logic and pay millionaires the DPB and WFF as well.

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  19. Kimble (4,092 comments) says:

    Maybe the millionaires have paid a lot of income tax/property tax/consumption tax.

    Income tax, property tax, and consumption tax aren’t savings schemes.

    The amount you PAY in tax is not strongly related to the benefit you GET from its spending.

    In principle, a society should reward good behavior and punish bad behavior. If a man has worked hard all his life, paid his taxes, raised a family to be contributing citizens to society, why would you means test him and withhold his Super while paying it out to a feckless layabout who has been a drain on society all his life?

    Super is a social welfare payment.

    A man who pays tax his entire life is not drawing down on those payments in his retirement. He is getting money from the current group of tax payers.

    I dont care what you thought Super was, less still what some politician told you it was. Right now, in this world we live in, it is social welfare.

    In principle, social welfare should not be paid to people who dont need it.

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  20. Albert_Ross (172 comments) says:

    Adolf, so you haven’t made any attempt to reorganise your finances so as to avoid the means test, and you don’t know anybody who does? You reckon there’s no incentive for anybody to do so, so that there’s no need for the Government to undertake any checking or monitoring? You don’t think that rich Australians get a lot more benefit from tax breaks on super saving than rich New Zealanders get from NZS?

    If genuinely interested in a thoughtful and thorough comparison of the systems, look here :

    http://www.cflri.org.nz/sites/default/files/docs/RI-Review-2013-Comparison%20NZ%20%26%20Aus%20Retirement%20Income%20Systems.pdf

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  21. dime (8,746 comments) says:

    “In principle, a society should reward good behavior and punish bad behavior.”

    That argument only works when the left are trying to ban something they dont like. eg sugar tax etc

    Apart from that, they like to reward bad behaviour. Blame the rich blah bah

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  22. liarbors a joke (1,069 comments) says:

    “feckless layabout who has been a drain on society all his life?”

    Suddenly I have visions of a P Ure…

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  23. Huevon (101 comments) says:

    I read somewhere (I think it was the biography of Rob Muldoon) that universal super was introduced in the 1970s because there was a cultural stigma against receiving benefits from the Govt. At the time, they must have figured that if it was universal, no one would complain about it.

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  24. OneTrack (1,957 comments) says:

    “So, under labour, Dime will no doubt be slapped with an envy tax. 40%? ”

    Only 40%?

    You need to check the coalition partners manifestos. What David Parker might say is one thing. Russel and Hone have other ideas. Expensive ideas.

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  25. Odakyu-sen (248 comments) says:

    Kimble, my position is that Universal Super is not a welfare payment.

    If we were to agree that it is, then I would favour means testing it.

    Being a self-employed individual who lives in NZ but brings foreign currency into the NZ economy, I tend to have a self-reliant attitude. I think it is wrong to punish people who have benefited the nation while rewarding those who have leached off it all their lives.

    Your claim that Super is paid out of current tax income rather than money the government has prudently set aside is deeply concerning. (Can anyone say “Ponzi scheme”?)
    If what you say is true, then the government will have no choice but to open the immigration floodgates and lower interest rates to stimulate the real estate market…

    … oh, wait a minute…

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  26. Alan (908 comments) says:

    “Kimble, my position is that Universal Super is not a welfare payment.”

    Then you are wrong, but you’ve been lied to about this, so I guess it’s understandable.

    Every penny raised in tax has been paid in providing services, there is no massive pot of gold. Labour tried to start one with teh Cullen fund, but National let it wither on the vine.

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  27. Odakyu-sen (248 comments) says:

    I was in the gym the other day and I heard that BNZ KiwiSaver (?) jingle: “I’m gonna work ’till I die. I’m gonna work ’till I die.”

    http://www.youtube.com/watch?v=bgs8Mo6ni6E

    It sounded so up-beat and positive, that for a moment I thought it was a new piece of social engineering from the government to encourage us workers to do just that. (I know I will probably working until the end…)

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  28. Kimble (4,092 comments) says:

    Your claim that Super is paid out of current tax income rather than money the government has prudently set aside is deeply concerning. (Can anyone say “Ponzi scheme”?)

    Its not a Ponzi scheme any more than any other social welfare payment is a ponzi scheme. Taxes arent retirement savings, and they arent investments on which you can expect a return.

    Every penny raised in tax has been paid in providing services, there is no massive pot of gold. Labour tried to start one with teh Cullen fund…

    That is paying for future liabilities. It is simply the reverse of issuing bonds to cover current expenditure. Not adding to it isnt letting it whither on the vines as the (substantial) balance is still going to earn a significant amount.

    There is little justification for increasing your provision for future liabilities at the same time as you are having to borrow to cover current liabilities.

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  29. Cunningham (746 comments) says:

    I’m more interested in them doing something about the parasites who live overseas for many years and come back to get free super. I know of one such lady who has lived and worked in Australia for 20 yearsd and plans to come back just in time for the country to give her a free ride. That makes my blood boil.

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  30. Nigel Kearney (747 comments) says:

    I know of one such lady who has lived and worked in Australia for 20 yearsd and plans to come back just in time for the country to give her a free ride. That makes my blood boil.

    NZ Super is reduced when the person is receiving income from an overseas scheme. If she has worked in Australia for 20 years she will most likely have paid compulsory contributions to a scheme which is now providing an income and her NZ super will be cut back accordingly. Though it is possible she was self employed or was able to cash up the Australian entitlement.

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  31. Kimble (4,092 comments) says:

    I expect, Cunningham, that you would also support doing something about the NZers who leave late in life and retire overseas.

    Perhaps pay them out the amount they would have received in a lump sum?

    Or is this another case of a petty New Zealander suffering from small-country syndrome whining about the “traitors” who left them behind?

    If they leave they should stay gone, huh? Spend too long out of the country and we will set the dogs on you if you try to come back, eh?

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  32. Alan (908 comments) says:

    “There is little justification for increasing your provision for future liabilities at the same time as you are having to borrow to cover current liabilities.”

    That of course depends if your cost of capital is greater or less than the return on your investments. It’s no different to any form of investment.

    Government cost of capital has been very low recently

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  33. SPC (4,633 comments) says:

    It should be an increase from age 65 to age 70, and phased in over a really long period of time.

    This takes account of the average age rising well into the 80′s.

    Say from 2025 to 2050, so 2030 66, 2035 67, 2040 68, 2045 69 and 2050 70, so we can do this now and in one go.

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  34. SPC (4,633 comments) says:

    And I do like the idea of a work tested super payment, and means tested for those age 65-70, coinciding with the increase in age. Not all will still be capable of working or of finding regular work. We should have done that with the increase in age form 60 to 65.

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  35. SPC (4,633 comments) says:

    I don’t like the idea of compulsory super at a universal higher rate.

    It would impact on the ability to afford home mortgages.

    I would reduce further the tax incentive to those who can afford to take up Kiwi Saver, the incentive to save should be in the employers contribution, not in the state borrowing money to finance a tax credit.

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  36. Alan (908 comments) says:

    So, raising national savings and creating capital to build business, at the same time as putting a lid on rising house prices is bad why ?

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  37. SPC (4,633 comments) says:

    Alan, how many businesses have been built by Kiwi Saver so far? Most of the money goes offshore, local money bids up asset values – is there any direct support to new business, at best there is purchase of some company bonds – that could and would have been financed whether Kiwi Saver Funds existed or not.

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  38. SPC (4,633 comments) says:

    But the biggest problem with a compulsory Kiwi Saver at a higher rate is of course with those renting property and who struggle to pay the rent and power bill now.

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  39. Kimble (4,092 comments) says:

    That of course depends if your cost of capital is greater or less than the return on your investments. It’s no different to any form of investment.

    Government cost of capital has been very low recently

    You are missing something from your analysis. Because as it stands you appear to be recommending that the government borrow up to the point that the cost of capital reaches to a point (due to their deteriorating credit rating) that matches the expected returns of their investments.

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  40. Harriet (4,010 comments) says:

    Tell Cunliffe to piss off – and take Key with him.

    Labour’s Keating introduced compulsary super so that ‘aussies would have more money in their retirement’. Fair enough.

    Yet all that the Australian government has ever done with super since then is change it – to suit themselves.

    After talking up the ‘ageing population & who will pay for it’ Rudd increased the aged pension from 65-67. And got the applause from all the young lefties!!!

    But – due to the GFC impact on the Australian economy – he halved the amount that people could put into THEIR super each year!!!! From 50k down to 25k so that more money would be “flowing about the Australian economy and saving Australian jobs!”

    Well fuck me – super is now not for retirement and the ageing population – but to help Labour manage the books!!!!!!

    Labor in the future will ALWAYS play with it, as two things have been at the center of the Australian debate – older immigrants arriving, and women being out of the workforce – as both of these two groups then save less for super due to the yearly cap, yet nothing has been done about it for over two decades. They soon will do something about it Labor tells us, but only for women. Everyone else can go to hell.

    Those going to hell are the ‘catch-up class’, where lower paid people can’t put the 25Kpa limit into their super each year because they are an apprentice ect on low wages – or others getting a further degree later in life – but then when they are on higher wages 4 years later – they are not allowed to exceed the 25kpa cap. So they have had 4 years of making no contributions, but when they can ‘make up for it’ they are not allowed to!!!!!!

    Or in other words – those who get the BEST paid jobs when young have the BEST chance to have the BEST retirements – and those who don’t – get penalised each and every year till they die!

    And why won’t Labour and the Liberals change it – because it takes too much money out of the economy, and also takes too much money from the tax take as super is taxed at a lower rate.

    But everyear they make ‘changes’ under the headline ‘fairness’! Like fuck is it fair.

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  41. Anthony (736 comments) says:

    Why don’t Labour means test national super instead – why keep paying it out to all those still working, all those with govt super of some sort or another (like judges, MPs, Police, etc), all those with millions of dollars of assets, all those with ample private super?

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  42. SPC (4,633 comments) says:

    Anthony, it would be unwise to discourage saving for retirement by means testing super pay out – and a surtax on investment income/private super was a form of progressive form of means testing on saving.

    But I agree that it should be seen as a support for those who have retired from full-time work, rather than be paid to those still working.

    Those earning over 2x the average wage from employment should not receive super payments. Maybe a form of surtax on employment income between the average wage and this 2x level.

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  43. Harriet (4,010 comments) says:

    SPC#

    The means test in Australia allows you to have a $1,000,000 home and your super assets of about [$800k I think] before you are ineligable for any ‘part-pension’. Up to that $800k amount you are allowed at least a ‘part-pension’.

    “….But I agree that it should be seen as a support for those who have retired from full-time work, rather than be paid to those still working…..”

    It is good to have the pension or part pension being paid to ‘part timers’ as it allows aged people to stand down from fulltime work and a younger person then taking their place. If the pension is not paid to part timers then they remain in the job at the expense of others. It also allows the nearly-retired to adjust themselves slowly into retirement where they are both physicly and mentally better off.

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  44. duggledog (1,103 comments) says:

    Taking money out of your pay packet for Kiwisaver compulsorily when you have a mortgage doesn’t make a lot of sense to me. The mortgage rate is always going to be higher than whatever you can get in your Kiwisaver account.

    Basically if it’s got anything to do with the NZ Government I’m out. When a bunch of leering slack-jawed idiots like Norman, and Cunliffe are forever just around the corner I would rather organise my own affairs and look after my own interests. You can’t trust them.

    As Harriet says above – Labor (NZ or Australia, or National for that matter) will always fiddle

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  45. Harriet (4,010 comments) says:

    “….The mortgage rate is always going to be higher than whatever you can get in your Kiwisaver account…”

    Maybe maybe not but still a good point:

    A mortgage is a form of savings.

    As an accountant told me years ago ” When you have a weekly mortgage at a level that doesn’t hinder your ability to live o.k[dual incomes are best], then maintain that till retirement.” He was suggesting that if you have a mortage below say $100K then borrow another 100k and buy a better house. The house increases in value in a few years time, and then you do it again. And again. At retirement you have a house worth $1million+ and no super – but you can then sell the house and buy a far cheaper one. In retirement you also have the time to fix one up.

    And all you’ve ever had is a 100+K mortage!!!1

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  46. Kimble (4,092 comments) says:

    A mortgage is a form of savings.

    No it isnt.

    The rest of your comment is simply discussing how you would favour leveraging into a single risky investment over a diversified pool of securities.

    The house increases in value in a few years time, and then you do it again. And again.

    Because house values always go up, always have and always will. Because they are that remarkable sort of asset that is always perfectly valued and never drops ever. In fact, there is no reason for anyone to invest in anything OTHER than property. Scrap the NZX, tear up your bonds. Just invest in property. It is at the same time brilliantly genius and patently obvious.

    Now what could that sort of mindset, writ large, lead to?

    http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11166353

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