By Bernard Hickey
Labour Leader Andrew Little has stumbled into a political hornets' nest by appearing to say for the first time that Labour could deny or reduce New Zealand Superannuation to people who were also working over the age of 65
Little spoke this morning at a post-Budget briefing for business leaders in Wellington and was quoted by the New Zealand Herald's Claire Trevett as saying Labour would consider means testing the currently universal pension, or at least that he thought that working pensioners should not receive the full New Zealand Superannuation.
Little's office later denied that means testing was being considered, but confirmed he had said it was unfair and costly to pay New Zealand Superannuation to workers earning income over the age of 65.
Little said the rise in the cost of New Zealand Superannuation towards NZ$30 billion a year was "terrifying."
"If there's one thing that scares the bejeesus out of me, it's the looming cost of superannuation. That's a significant chunk of the Budget," Little was quoted as saying.
When asked about means testing, Little said there were some elements of unfairness in universal superannuation, pointing to an example of someone over the age of 65 who was still working and receiving the benefit. He was reported as saying Labour would look at the issue, which he considered unfair.
However, Little said he was committed to his previously expressed view that the age of eligiblity for New Zealand Superannuation should not change from the current 65, even though Labour's policy before the election was to progressively lift it to 67.
"I have a personal view that I don't want to see the age of eligibility raised," Little said.
He added that Labour's focus would be on pre-funding New Zealand Superannuation by resuming contributions to the New Zealand Superannuation Fund, although he would not say when that would begin.
"I'm confident we could manage the future cost without changing the role of eligibility," he said.
Then came the denial...
A spokeswoman for Little later denied he had suggested Labour was considering means testing New Zealand Superannuation.
"He said superannuation was a looming issue requiring $30b by 2030 and the Government has failed to even consider what to do about it," she said.
"He said our policy was under review and offered as an example someone working and receiving super and spoke about the fairness of that. Means testing was not mentioned nor is it a policy option we’re looking at."
"There was a question from the floor and Andrew responded about the need to do something about Super, spoke about the complexities of it as an issue and about the fairness of current policy. He did not mention means testing and he wasn’t referring to it. It is not being considered in any review."
ACT welcomes debate
ACT Leader and Epsom MP David Seymour offered to help Little out of a tight spot by repeating his suggestion of a referendum to reform the cost of NZ Super.
“He has shown why an issue with such important long term implications might better be better handled under ACT’s referendum proposal," Seymour said.
"All parties can put aside their political positions, join together to form a cross party working group – like the flag committee – and appoint an expert group to identify workable options for the long term sustainability of NZ Super. These options, including no change, could then be put to referendum for the voters to decide," he said.
“I have confidence in the common sense of voters to support an option which would ensure the fiscal sustainability of NZ Superannuation, an option which is fair across the generations of taxpayers.”
(Updated with spokeswoman denying Little had mentioned means testing, Seymour's comments).
86 Comments
Personally my goal is not to maximize my handout from the government. I plan to save enough for my retirement so that I don't need hand-outs (probably just as well given it is so hard to make changes that make the scheme sustainable in the long term). Super is welfare plain and simple and welfare always rewards the crickets over the ants - it's unavoidable.
Well for everyone thats not working thats another job for those that still need to work. We dont want to destroy the insentive to save. Much fairer to raise the entitlement age over time with a provision to receive it earlier for those that can prove they cant work.
Yes, if they have a means test it has to be aimed at accumulated capital not labour - although philosophically I'd rather see the jobs taken up by the 65+ going to the younger generation instead. If you look at the labour force participation rates - the growth is all in this post-65 bracket, which is a worrying trend in its own right. I often think it might be worth exploring the option to pay grandparents or older relatives the childcare subsidies that this government is so keen to fork out in return for parents of young children returning to work.
I'm guessing we will 'go broke' - although point is we are already there given we spend more than we earn and we owe more than we can reasonably ever be expected to pay back.
So its more a matter of when will our lenders (or our occupiers) decide they've had enough of our guilt edged pension scheme.
I reckon we need to be the mouse that roared on the international stage.
The reserve currency nation is setting the trend and we remain a derivative devotee.
Those having a hard time finding growth in the U.S. economy are looking in the wrong places.
Forget about real estate, technology or manufacturing: The real American growth industry is debt. While gross domestic product has lingered in the 2 to 2.5 percent growth range for years, the level of debt as measured through credit market instruments has exploded. Read more
The CTU has done a budget analysis - available at the present on Dropbox;
https://www.dropbox.com/s/numjao5s75v02hy/ctu%20report%20on%20budget%20…
Best 'real world' analysis I've seen so far. Comments like this;
Moves to get to a surplus in the government’s accounts (an over-rated concern compared to the other deficits New Zealand faces) is plagued by low inflation. Core Crown tax revenue is rising more slowly than expected because wages and prices are not rising as fast as forecast. In fact the forecast 2.8 percent growth in Core Crown tax revenue in the year to March 2016 is expected to be dominated by the increase in taxes on wages and salaries (contributing 1.0 percentage point), followed by rises in consumption taxes (mainly GST – again mainly from wage and salary earners) contributing 0.8 percent. Corporate profits contribute only 0.3 percentage points of the increase. Residential investment is forecast to contribute an unusually high 0.4 percentage points but new policies in the Budget contribute only 0.1 percent.
Good to know someone gets it.
Thanks AJ...
Simple economics from way back..World war 2 in fact....Simply funny....when 50quid had to go around and around...
Gotta laugh....When money stops going around..it is a problem.
When interest gets added on....it compounds it. When the Bank cannot get its money back....World War 3...may be declared as now billions involved..owed by millions...compounded to trillions..
Haven't heard of or from Steve Keen for a while
Steve Keen is something of an iconoclast among mainstream economists
Here is his Interesting View Of The Greek Debt Crisis
http://www.forbes.com/sites/timworstall/2015/05/20/steve-keens-interest…
... yes , they're stuffed on two fronts ... one being their extraordinary " tin ear " affliction , which means they're profoundly deaf to what the people ( the great unwashed ) are trying to tell them ...
And the other , that Little Johnny & the Gnats have moved left , and now hold a 99 year lease on Labour's former stronghold , the social welfare voters ...
... and I suppose that I could add one further little problem , that the very left of centre Greens are frequently making more sense , russeling up more attention , and creating better proposals , than Labour ... we live in strange and amazing times ...
They paid for it their entire lives, it was contracted to them in return for paying the previous generation and part of the agreement for the taxes they paid. Thus they are entitled to what they contracted and have paid for.
If you pull it for the prudent, you need to pull it for everybody.
the pension system in NZ is paid by the current taxpayers. The invention of the Cullen Fund does try to help, but it is small. There used to be a large fund back in Mouldydoons day by the Labour & Unions packed a hissy fit about it being market manipulation, so they spent it. Leaving all the funding for NZ super/pensions to come directly from the general fund (taxes) until Cullen started a Fund.
So yes they did pay for it ... and those who paid the taxes and saved for their own retirement have paid twice, and are still being taxed to pay their own pensions.
seriously this is simple NZ history do I really have to look it up for y'all
(PS you can tell because, before the Cullen Fund (which started out smallish) there was no fund/investment to pay it WITH.
You could equally say that NZ is borrowing for its health system, its education system, its defence system. The extent to which Government expenditure is funded by borrowing is certainly an issue, but not one that's any more relevant to pension funding than to any other form of Government expenditure
.. a great pity that the government(s) totally ignore the tax working papers which have been presented to them over the years ... papers which the current and the previous government each instigated ...
We would now have a comprehensive land tax .... and consequently have less need to borrow off-shore ... infrastructure projects could be easily internally funded ...
... the idle rich and speculators would have had a little of the fat trimmed from their ample portfolios ... absentee owners , moguls , Chinese chaps , Hollywood stars , Dotcoms of every colour ... all would pay their proportion back to the state ... no exemptions , no loopholes ....an annual stream of income flowing into the government's coffers ..... sighhhhhhhhhhh ..... just my wee Gummy dream !!!!
Are you serious Andrew Little? Where do you think the NZD's come from to fund NZ super? That's right genius, we print them. We don't have to borrow from any other country to make them. So NZ super can NEVER go bankrupt. Is the Labour Party really the party you should represent? maybe ACT would be more appropriate.
The NZ Super money comes from the tax money - it's well documented (and discussed previously on Interest.co.nz). When looking at the scheme it was considered how the old age people would be funded. An expert at the time said the ONLY place that size of funding could come from is the people still working today, anything else would be a huge capital behemoth that would upset all other investments in NZ, and require a return that would be problematic to achieve over the lifetime of the investors.
That's one of the things that is so wrong with life now :- we are having to pay for the pensioners now, who paid for their old folk... while saving Kiwislaver money to backstop the financial and government in NZ knowing that there will be NO NZ Super when we get old enough to qualify (those few of us who don't die off before then) ... and when those of us of the HiddenGen, GenX, and the Millenials get to the 50 - retirement, they will be sucking all the money directly off our fikislaver accounts anyway... they already drop the $1000 promised start up and tax the untaxable employers contribution incentive.
I'm thinking it's going to take blood on the water before the pragmatic government stop helping themselves to other peoples' property and earnings, but the pragmatic types will still think it's ok as long as they think they're making a profit in the process.
just find a link to it rather than my occult stuff.
Lol. what a lot of self-serving BS. They're trying _again_ to release scrip and docketed reducing notes.
Ok. First piece of news you _really_ have to absorb and swallow. Governments DO NOT create money (or wealth, or income, or value, or any useful resource whatsoever). Neither do government departments, politicians or quangos.
Next...any time you see a government playing with money as if it was the controller you know they (a) padding their own pockets because they don't produce anything, (b) and swapping deskchairs to make fools think the government owns stuff.
let me tell you how "government money" works. We'll use a recent comment by DairyNz and a directive put in place by the government department MPI.
Dairy farmer has to buy land, animals, work hard, pay interest and all expenses themselves. and they get their income for provide a real product (milk) that is a commodity which helps keep people fed and export to keep NZ economic above sea level. And they get taxed for their troubles.
DairyNZ (paid by levys and tax) have just said to the farmers, some of whom only get $50 a week, that times are tough and that the farmers shouldn't budget on getting more than $1000 a week. Note that the DairyNZ staff aren't expected to get paid any less for this wisdom.
MPI have annouced refrigeration improvements. How many refrigeration units does the government department MPI improve? Zero. How many refrigeration units does the government or the government department pay to get improved? Strangely enough...exactly the same number staff as they have getting paid as little as the farmers are getting paid... Zero. Yet the taxes taken from the farmers for their real product which is actually useful pay these government clowns MORE than the farmers themselves are making on the business even though the government has not actually done anything of use. It is the guy on $50, who is told not to budget on getting $1000, that is supposed to take the hit and pay for the improvements.
So ... real money is real resources, real value add.... private sector.
Any system which has government handing out notes or tokens is just phony BS, and based on a ponzi pile of lies, each one getting deeper than the former. Hence the Alexander answers to the knotty ponzi problem. you scrap away the self justifications, the government fishoils baiting their hooks, and the answer becomes clear very fast.
I agree on how governments can spend without creating. it puzzles me why we don't have a tax free threshold like other countries for the low paid, for some reason they get the money back in form of credits, same principal but costs more. tax is collected processed by govt workers, then another set of govt workers decides x needs a credit because of low wages, meanwhile how much of the dollar collected has now been spent on administration.
Its done that way because -everyone- gets those tax credits. As you earn to the thresholds the rebate is reduced for -everyone-. No reason poor and freeloaders should get breaks that other higher contributors don't get.
What annoys me is that the no-risk, no-contribution, fixed-hours, near guaranteed employment and income types, who don't actually produce are paid so much more than everyone else
Good work Labour. As a young person lucky enough to be in a sound position financially (although missing this housing boom!) I think that we should have to provide for ourselves in retirement. It should just be a safety net for the hard up, or maybe bottom 60% of the population. $300 a week makes no difference to a weathly retiree.
Speak for yourself.
Keep your XYZ hands out of my XYZ wallet.
Unlike you, some of us worked damn hand to get that money, made enormous sacrifices.
Watched wastrels and thieves get the free rides.
you think $300 a week is such a little difference, we can start taking the extra from YOU today.
The "hard up" are frequently that way because of choices they made, or that they got ripped off.
should my parents who worked their asses off and went without and paid huge taxes,
STILL have to support those who smoked, boozed, spent up on the latest cars and holidays? NO!
the only _fair_ option is everyone paid their way, and everyone gets the support the government OWES them. Or no-one is entitled to freebies at other peoples' expense.
But super is not your money! It is my (our) tax money and I see no reason it should go to someone who doesn't need it. Your argument only holds water for fully funded retirement schemes but currently the baby boomers are expected to be paid out FAR more in super than they paid into it in taxes when working. How is that fair?
Actually I am not sure it is and by a long way. ie we have the Cullen fund to meet that partially and then higher taxes are possible, ie there is no evidence that a higher tax rate for high income earners is detrimental until about 60%. So rather tahn the tax cuts BE is hinting at in 2017 restarting the Cullen fund with that would make sense.
Options and numbers are set out at http://www.treasury.govt.nz/government/longterm/fiscalposition/2013/pdf…
As steven says, it's not at all clear that it is unsustainable, particularly if you adjust the age of entitlement. As at 2013 the cost was projected to peak at just over 7% of GDP, which is a lot less than many other economies are paying now.
Good paper with good options (all with pros and cons). Problem is current government doesn't want to do any of them and anyone who suggests that we need to do one is lampooned. Means testing isn't necessarily my favourite option (because of the opportunities for hiding means) - but can we please do something.
Avatar. Those 'who need it' by and large have not paid any net tax. With progressive rates, and WFF and all the rest, they don' pay much, if any, of the tax burden. Yet you would deny the pension to those who have paid tax and give it to those who have not paid any.
What do you mean by "deny"? The government owes us nothing. We live in a civilized society and pay our taxes. The government pays out those taxes in a variety of ways. Why on earth should someone be "entitled" to money that someone else pays in taxes just because they happen to be over 65? It would be completely different if it was a funded scheme (like the Cullen fund or Kiwisaver) - but is is not. As per my comment above - more tax money goes to crickets than grasshopers, it is simply something to accept if one believes in the welfare state.
Exactly. We give to a lot of charitable organisations these days - far more than what we used to - simply because it is so obvious that there is a greater need across such a wide variety of sectors that used to be government responsibilities. Now the government part-funds them and expects them to raise the balance via charity. Point is - at least the government puts out very detailed budget/expenditure information, and frankly I don't know anywhere near the detail on how my charity dollars get spent. Hence, I'd far rather pay higher taxes in the knowledge that everyone has a chance to be healthy and succeed in life - and have the government accountable to me for my contribution.
Oh Contaire. the government owes us _everything_. That is in fact their purpose, their job.
What the government doesn't do, is that it doesn't _own_ anything...being no more than a literary construction an' all.
Lets see do I believe in your welfare state?
My great grandfather and greatgrandmother worked on NZ railways. They were Scots and extremely prudent. they saved hard, managed the resources (the carefully kept bits of string and packing paper were a testament to their life during the Great Depression). There only vice was my g.Grandfathers smoking habit which he picked up in the war, back when the government thought it was a safe thing to relax soldiers (thus issuing the cigarettes).
His next door neighbour was a drinker and a wastrel. Had to have the large multi-story house, had to have a car under two years old, bought friends in pubs and business lunches. Bought all the kids cars. Blew the lot and when retired still owed just under half of the house to the bank (they kept redrawing the mortgage to add stuff to the house and take holidays).
When it came to pension time the government grumbled about paying my Great Grandfather a pension. Made him pay all his own medical bills even for the lung cancer that killed him.
The "poor" neighbour got the State Welfare. After wasting everything he got more handouts. Looked like he was going to lose the house so the government paid him extra for not paying it off (my G.Grandparents had carefully paid their smaller property off, allowing them to save for their retirement and keep expenses low).
When the neighbour got ill (no surprises, liver sclerosis) , he had no money so the State paid for his medical bills and medications.
When my ex had spent all our money and got us in big debt with the bank she worked at. She left me because she didn't like the "cheap living" lifestyle. Your welfare state paid for her legal bill...and put the lien against my property, your welfare state paid her to live and billed me - even though she was the one that left. Even now, when fonterra isn't paying enough for the business to cover minimum wage, your welfare state is charging me, and paying her.
when *I* went to WINZ suffering horrendous mental exhaustion to the point of collapse, and injuries that prevented me from working - they said "You gave notice 6 months ago but you have been helping them until the new guy showed up" so we're going to put you on 3 month standdown, even though the only property you have is the shirt on your back and a borrowed car (and the negative equity house, after buying the ex out).
Your "Welfare State" has been one of the few times I have serious contemplated an act of lethal violence against other people. so much so that I cheer out loud whenever I hear one of those pricks gets whats coming to them.
do I believe in your welfare state? I've had more compassion and aid from homeless, drunks, drugs and gang members. I believe more that John Key is the Second coming of Christ than I believe in your ... welfare ... state.
Crikey Peakeverything we know Cowboy has had some trials and tribulations. Knowing govt welfare is being used to rort you of your property and your children isnt easy to swallow. Been there as granny to a couple of littlees. Welfare can allow people not to grow up and be adult. Too easy to walk away...just walk away
Also the abatement system makes it damn hard to get off the welfare, as every time you try to improve anything, the "discouragement" policy slams the person back down.
Sad thing about it is that there are several better options than the welfare state/state welfare. but because The Government controls the welfare state, and the Sycophants believe in the almighty infallible State, there is *zero* chance of anything even being tried. As for the threat to the empire of those non-elected bureaucrats involved *in* the preocess of the welfare state, they'll see the world burn before they part with their sinecure.
Doubt me? Find out for yourself what the employment span of a hardworking positive WINZ is. I was on sickness benefit (no accomodation) just been through a full mental breakdown, a couple months later, 2 case workers later, and the only guy I've ever seen moving who looked worse off than me was the new case manager - I don't know what the hell they were doing to the guy. But he managed to get me a break, put me on a course by bending several rules - been plowing forwards ever since, but damn they must have been making life hell for him to be looking life that. (I was worried he was going to die before the interviews ended!)
I can't say much more because I don't want them trying to hunt him down.
Do to the demographic "bulge" not per person, which the Cullen fund aimed to redress btw. previous voters decided for us that having an OAP and Public health servers was the way to go to avoid poverty. As an example I will have paid close to 50 years of taxes part of which was for the last generations OAP based on the expectation that I in turn would get the OAP. On top of that I have been paying tax for you education til you left school. So sure if we are now not going to get an OAP then I expect a tax refund and you can pay the sums for your education back so I can self fund my retirement.
I too work very hard for my money. I am just concious that I am in this position because my parents did the same and a lot of people didnt have the luxury of growing up in that manner so dont know any better.
Im not suggesting people that dont have a lot dont get it, the whole point of the article is MEANS TESTING. I may get to retirement and need that 300 as well, but if i do ok and save and work hard i hope to be in a position where the 300 can go to someone who needs it more. It shouldnt matter that I have paid hundreds of thousands in tax, or saved harder now. They are decisions I am making to give myself a better future.. just as you are.
It is clear you are a user pays, eat what you kill person and so we are never going to agree. But if I get to retirement, and can only fill my boat once a week rather than twice so that the poorer part of society can feed themselves I think thats probably a better fairer option
Actually I'm not a "user pays" person, certainly lean towards the "if you killed it, you better be ready to eat it:."
I'm a "if you consumed it, and you don't think you should have to pay for it, then I'm pretty sure that the person who didn't consume it should have even less reason to do the paying" person.
The goal should be to provide for ourselves in old age. The welfare state exists for those who cannot. I don't go to my insurance company asking for a refund because I wasn't unlucky enough for my house to burn down. I shouldn't go to the goverment asking for a hand-out to "get my fair share" of taxes I pay in if I have had a good life and not needed any hand-outs.
I very much doubt it will be an option by the time I reach 65 - especially given the current lack of action in making it sustainable. However, it's rather unrealistic to expect people not to take "free" money when it is offered. Kate's idea of a registry is a good one, but personally I'd much rather my tax dollars went to people who needed them.
Well that's the crazy part, and I can't understand people like Avatar complaining.
So they don't feel like they need/deserve the NZ Super - then they can pick a charity _they_ believe in, and donate it there. Or if they don't believe in blanket charity funding then the IRD do actually have a donations system... it's not often used but it's there. If they really feel like they don't want it the options exist.... the questionable part is where they don't think other people should get the option.
I'm a floating voter. In the last two elections, I voted Labour on the basis of introducing a capital gains tax on property, putting up the eligibility age for superannuation (but not means testing), plus introducing voluntary euthanasia legislation.
All that is now gone, so I am trying to think of who I can rationally vote for. Thanks a lot, Andrew.
That old taxpayer funded pension forever scheme for ex-serving MPs went out in 2003 with a law change;
http://www.legislation.govt.nz/regulation/public/2003/0306/latest/DLM22…
They are now on a matching contribution type of scheme - a Kiwisaver for MPs. Granted the max that the taxpayer might have to match is generous (up to 20% of an ordinary member's salary) but of course the matching only goes on whilst an MP is a sitting MP.
And yes, they would be subject to means testing just like any other citizen if means testing were introduced.
Given the way Trusts have been treated differently over the last 30 years, I'm waiting for critical mass in the Trust industry so the government can swoop in and vacuum it all up. (eg locking it in with a 80% taxation of withdrawls, 66% tax on disbursements). They just need to push as much into it as possible.
Think a similar double-tax system will be levied against Kiwisaver in the future (for the national good)
the nonsense is that we can take more from the government than we give it. If the unversality of super is to go then the whole scheme needs to go.
Then implement compulsory Kiwisaver for everybody. No rubbish that some can't afford it. Actually they can not afford not to.
Can we aford? Cant we aford? It all comes down to money and who has it and who hasnt.
Some people can print money when it suits them while others cannot print their own money.
The debate should be about money, then about what can and cannot be afforded.
Recently there have been trillions of dollars printed to bail out banks so that could be a starting point.
If you print money and distribute based upon a controlled per capita amount then inflation/deflation should not be a problem.
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