Tens of thousands of well-off pensioners are claiming up to half a billion dollars in superannuation every year.
With government debt at more than $60 billion, critics say the wealthy are asking their children and grandchildren to fund their so-called retirement.
Ministry of Social Development figures revealed more than 26,000 people with total income of more than $70,000 a year claimed superannuation last year. At current rates, this could add up to $570m a year before tax..
These figures, released under the Official Information Act, come as the country wrestles with how to pay for our growing retirement-age population and looked increasingly isolated in offering universal super.
The Australian Government recently announced plans to raise their retirement age to 70 in a bid to ease the growing financial burden of the ageing population. They already means test pensions.
University of Auckland business lecturer Susan St John said there were likely to be far more than 26,000 well-off people claiming super, as many were able to hide their earnings through investments and trusts.
She said the country had become far more generous to retirees at “the top end” in the past few decades. In the 1980s, a surcharge was used to rein in super payments for high earners, but that had been abolished in the late 1990s.
“There is a case for redesigning the tax system to gently claw back NZ Super, at the top end – without affecting the living standards of the bulk of people who might genuinely only have small amounts of additional supplementary income.”
I think all benefits should be income tested.
St John has proposed such a system to the Treasury, that would effectively claim back the bulk of super payments in tax from the wealthy.
Brian Gaynor, of Milford Asset Management, said New Zealand was an exception and most developed countries, including Australia, means-tested super payments.
“There are people who are very wealthy, and I don’t see why they should be eligible for NZ Super,” he said.
“They do pay higher tax on it than someone who has no other income, but that doesn’t justify it. It doesn’t seem to me to be the best use of the country’s resources.”
Means testing can be both income and asset testing. Useful to be specific about which we are referring. Incidentially a reader pointed out to me by e-mail that in the 1950s the means test included how many pairs of underpants you owned!
But Grey Power president Terry King said retirees who have saved to supplement their income, even by $60,000 or more a year, should not be penalised by income-testing policies.
“If they’ve worked hard through their lives, through business or whatever – superannuation is an entitlement, not a benefit.”
I disagree. Far better to have people pay less tax when they work, rather than over tax people during their working lives – to then give a fraction of it back to them when they turn a certain age.
And while Labour has mooted raising the retirement age from 65 to 67, neither of the main parties nor the Greens were interested in giving less public money to retirement-aged people who had a little extra cash.
Not quite correct. The fine print of Labour’s policy is that they will effectively income test NZ Super from age 65 to 67. That sets a precedent for extending income testing to all ages.