By Bernard Hickey
Imagine the government's and the public's outrage if it was discovered that there were more than 80,000 New Zealanders who received wages, salaries and investments worth more than NZ$6 billion per year, but were also receiving a benefit from the government to keep them comfortable in their old age.
There would hours of talkback. Newspaper headline writers would reach for the big fonts and editors would order up grumpy editorials.
Politicians would thump their tubs in rage over the unfairness of beneficiaries receiving their own incomes and drinking heavily from the taxpayer's teat at the same time.
Yet that is exactly what is happening at the moment with New Zealand Superannuation and there is not a murmur of protest.
Income figures this week from Statistics NZ show that more than 80,000 New Zealanders over the age of 65 receive wages, salaries and investment returns. There are no numbers showing exactly how many receive both salaries and NZ Superannuation, but official estimates are that 98% of those over 65 claim the benefit.
There are 80,400 people over 65 receiving average weekly wages of NZ$737, while 35,100 were self employed earning NZ$597 a week. There are 318,500 receiving an average NZ$150 a week from investments.
All up they are earning over NZ$6 billion a year from their 'moonlighting' while 581,500 are also receiving an average of NZ$325 a week in 'government transfers', including New Zealand Superannuation.
The Government-paid superannuation paid to those 80,000 plus seniors are costing much poorer taxpayers at least NZ$1.3 billion a year.
Many of those receiving the benefit will be retired judges, politicians, chief executives, doctors, diplomats and lawyers who are well able to look after themselves from their own pensions or salaries.
So where is the public outrage?
There's plenty of precedent for cracking down on beneficiaries who are getting more than thought necessary to stay above the poverty line. Our Government has spent the last five years progressively tightening the screws on unemployment, domestic purposes and sickness beneficiaries to get them back out to work and off the benefits.
Its 'social investment' approach appears to have succeeding in capping the growth of such benefit spending.
Budget figures released this week showed spending on Social Security and Welfare in the just completed year to June 30 actually rose a relatively modest NZ$700 million to NZ$22.7 billion.
However, most of that was because the number receiving NZ Superannuation rose 28,000 to 613,000 as the population aged.
This apparent unfairness in cracking down on poor beneficiaries under the age of 65 and letting millionaires over the age of 65 receive a benefit is not challenged because of the widely-held consensus that the universality of NZ Superannuation is a good thing.
It's true that NZ Super is remarkably successful at keeping our elderly out of poverty. It is simple and easy to administer.
There is no great fondness for a return to the bad old days of means testing.
So why am I challenging that consensus?
This week for the second time in three years the Government's official adviser on retirement savings recommended a staged extension of the age of eligibility and a change to a form of indexation that would reduce the long term cost of NZ Super to the taxpayer.
The National Government slapped down the proposal within 12 hours and insisted the scheme in its current form, with retirement at 65 and the benefit for a couple set at 66% of the average wage, was affordable.
That's despite the advice of its own Treasury that the scheme, along with no other changes in tax and spending settings, would see Government net debt blow out to nearly 200% by 2060.
Young taxpayers may be ignorant at the moment, but they are not dumb in the long run.
They will eventually work out they were stitched up by the older politicians and voters in the first two decades of the 2000s and demand means testing.
That's a pity because a universal and simple scheme is good. It just has to be sustainable, which the current one is not.
Meanwhile, the simplest way for the enlightened rich retirees to do the right thing is to decide not to apply for NZ Superannuation when they have their 65th birthdays. How many politicians and Grey Power lobbyists would choose to do that?
Cue the Tui billboard.
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An abridged version of this piece was also published in the Herald on Sunday.
134 Comments
Good on you Bernard for talking about this. It really riles me when I hear about asset rich cash poor pensioners moaning about rising council rates and not being able to afford it. Have they stopped to think that maybe it's now time to sell up and downsize. Just like first home buyers can't afford to live in the nicer areas, neither can fixed income pensioners. As for the 80,000 who are both asset rich, investment rich and are still working and don't need superannuation, and are stealing from young wage earners, shame on them. I would definitely be keen to vote for asset testing of nz super. It's only a matter of time.....
This apparent unfairness in cracking down on poor beneficiaries under the age of 65 and letting millionaires over the age of 65 receive a benefit is not challenged because of the widely-held consensus that the universality of NZ Superannuation is a good thing.
Fear not young amigo - the prescriptive offices of the IMF have taxing solutions at hand (page 47 PDF reader, page 38 document).
NB - IMF employee research bias must be discarded in reaching a personal conclusion in respect of their recommendations - they pay no tax in any of the jurisdictions where they are employed and are hardwired to preserve that privilege at others expense.
to preserve that privilege at others expense.
let us use voice and image...
http://www.smh.com.au/tv/Money/show/How-the-West-Went-Bust/Partys-Over-…
Any asset rich older people got that way because they planned their way out of debt, put in the hard yards and didn't squander their money. I humbly suggest they did their bit along the way and probably over contributed to the tax take that provides the handouts so many in society see as a 'right'. The opposing view to Bernards is why should wastrels and those who spend their lives being irresponsible or on welfare receive Super at all? Leave people in the homes the earnt. Envy politics are reserved for Labourites.
Simple, the BBs took most of the natural resources and converted it to houses, paper wealth and toys that they dispose of when a new one comes out....now in their old age they expect the future generations to support thier old age in what little is left....
If you cant see that amoral theft from the future, there isnt much else I can say.
regards
Where is the outrgage when you save all your life into a govt pension fund and also are luckilly enough to be able to boost that with a private pension and then when you retire you get your govt pension taken away due to means testing and some idiot, like the ones who don't insure either, get a govt pension.
I agree, in principal, with the rule; but it has to be a sliding scale and have sensible rates of clawback, like, for example, if you are 50 and do two weeks in Govt as a labour minister and get full pension rights for life, of 300000pa, then you just might not need the extra $2.50 a month state pension.
Of course this balanced editorial made this case too...
;)
Iwork for an SOE which is closing it's doors in many area very soon.A high proportion of the staff are over 65 and some even in their 70s.
These people have not only being getting top wages but also enjoying pension payments along with their partners.
When they are made redundant not only will they get redundancy but also the SOE super plan and continue to get the pension as well as not having to look for a new job.
Meanwhile our younger staff members with mortgages and famlies will have to go out and compete in the tight job market .
"So why am I challenging that consensus?" Bernard, what you are doing herein is indulging in the devisive politics of envy. I have been suspicious of you ever since you turned tail on the matter of debt; remember your "until the pips squeak"? Here you show your true new, Red, colours - likely in preparation for a foray into communist politics.
The wealthy superannuants you attack are not "moonlighting", they are obeying the rules of a system that they were promised, from a nation that they (and their fathers) built. Future generations may also enjoy the same, in their turn. No risk here of pension funds being wiped out by a stock-market crash either.
Ergophobia
So you want the "promise" of universal super at age 65 to broken for a younger generation, as long as it doesn’t impact your generation? We all know it's not sustainable
By the way every generation has forefathers that built this country, that is not unique to one generation.
Silly woman, nowhere do I say to break the 65 y/o qualifying age for future generations - the existing scheme operates by each generation receiving it in its turn. It is a gem of simplicity and immune to the vagaries of the stockmarkets. Meddle with it at your peril. "Building" leaky houses will be the biggest legacy of the neurotic gen. X & Y'ers
Ergophobia
What a lot of rot (pardon the pun). In the mid 90's when Boron treatment of framing timber was stopped, it was dopey young (born after 1960) Greenies that were behind it. And the "chippies" up the ladders who use silicon instead of metal flashings are not of my generation either. And I'm not your "mate": among men that's another X&Y predilection!
Ergophobia
Nowhere did I accuse you of wanting to break the qualifying age of 65. I was making the point that the current universal scheme which starts at age 65 is not sustainable as the population ages and ratio of retired increases. Therefore it will have to broken in its current form at some stage, you are obviously outraged at any suggestion of changing it while you are alive, so clearly the fair thing to do is wait so that a younger generation is shafted instead?
The longer it is left in its current form to uphold "justice" for baby boomers the more "injustice" is dealt to a younger generation.
Yes you did, in your first sentence. I don't want the scheme "broken" for any generation as it is one of the best in the world. It is quite sustainable and cheap to run; those most vocal agin it usually have skin in the game and a want compulsory captive customer, contributory scheme subject to fat fees and a "professional" advisory/commentary industry bolted on, to their advantage.
Ergophobia
Is it outrageous that high earners, who have paid most of the income taxes collected over the years and who saved and invested, rather than spent, some of their money, get a very small portion of that tax back when they reach the age of retirement?
Change you boring inter-generational hatred provocation broken record!
Another question is how those high income earners gathered their wealth on the back of the community.
Example: Is a law partner really worth thousands of dollars a day? How can the HR consultants that recommend these ever higher wage packages justify their figures when much of the base has resulted from their earlier ramping and not by true worth- whatever that is?
By all means put a higher marginal tax rate on incomes (including gains and bonuses) while they are in the workforce. Why not 80% of everything over $300k (example only)
Some would say we would lose the brains.
Lets be honest, we all know the vast majority of their wealth came from property which they paid no tax on at all.
The wealthy do pay more tax, that's the way of the world, there is no right that comes with that ensuring it comes back to you in retirement or any other form.
Oh and your generation didn't get a free university education, child tax credits to buy your own homes, housing corporation loans etc etc. Dont you think you haven't had enough free handouts to get where you are today? In the day when you were young and starting on the property ladder the government valued young first home owners and most of the houses in New Zealand today were built to support families (1950-80s).
What about all the young people today who are working their butts off just to pay rent so that you can get richer and still claim superannuation.
Yes you are working the system and the system has got to change.
Maybar, To put the record straight - I worked every university holiday at the Westfield Freezing Works in blood and guts, then spent the first ten years out of university living under canvas in the bush logging and hunting; bought my first house and ten acres with cash; so don't talk to me about "handouts". You moderns are all on welfare nowadays: "Working" for Families, Child Care, Baby pay, Accomodation Supplements, subsidies for all manner of business, welfare for globe-trotting yatchies etc. I don't see many young people today working their butts off, not townies anyway - they are soft woofters, living beyond their means and always moaning.
Ergophobia
I think your life choices were a little bit different to most of the baby boomers I have come across and not really representative I have to say. Why don't you google "Priced out" by the NZ Initiative and then you will know what I'm talking about with respect to government subsidies, capitalisation of the family benefit and housing corporation loans. You ask any baby boomer and the response will be "Ah yes, that's right, we got one of those to buy our first home....."
And for the record, no my family earns way too much for WFF, a welcome home loan or any other kind of handouts.
I did do my homework thank you very much. The family benefit was "universal" so everybody got it. In 1979 you could capitalise the $6/wk you could get per child over the next 18 years to a maximum of $3,000 to put towards your deposit. This was in 1979 when my parents bought their first house for around $30,000. I don't see the government giving first home buyers 10% deposit handouts today to the tune of $40-60,000 do you? All I see the government doing is protecting the ability of those who enjoyed the governments subsidies to use untaxed capital gain made on the benefits they received to price young people out of the housing market, by renting out second or third rental properties to other people's children and grandchildren.
Emotive stuff. Handouts. Yes, the "child benefit" was universal (I didn't say it wasnt), but the "capitalisation" of it was means tested. So your parents comprise your sample survey? And it wasnt a handout. You sacrificed the receipt of future child benefit payments. You simply got it in advance. But you had to satisfy certain criteria. You couldn't get it if you didnt meet those criteria. Not everyone could get it. Was it discounted? I dont know.
Yeah, I read Basset's tirade. What he rmains remarkably silent about is any subsidy (should you wish to call it that) was only granted to FHB's building a new home (90 sqm) who were on a subsistance wage. It was means tested. Not everyone got it. You had to be on the bare bones of your arse in a lowly paid job to get it. Married. With children. House had to be in joint names as a joint-family-home. And you had to live in it. Were your parents working in highly paid jobs with high annual incomes. If they got these hand-outs I would doubt it. How big was the house?
What subsidy do you mean? No that is not true. The people I know that benefitted from housing corporation loans and family benefit capitalisations were engineering graduates, architects, teachers. In fact one family I know who both parents were professionals in the day qualified for a housing corporation loan, and now have several rentals and a family home worth 1.5 mil. As for my parents, they did not qualify for a housing corporation loan as their income was too high. In those days you only had to rely on one income, and my father was a university graduate and yes they were married with two small children when they bought it. The house was about 5 years old and in the suburbs.
Basset refers to them as subsidies
You refer to them as hand-outs
The "subsidy" was the benefit of a 3% loan compared to commercial rates. I was a graduate at the time. Fresh into the work-force. Got the child capitalisation on the first child only, but my income was just above the means tested thresh-hold to get a 3% loan so I missed out there.
I worked two (at one time four) jobs whilst studying at University.
Up at 0400 am for Milk Round, out at night to work on bar(s).
I am not age bashing (or welfare bashing) in any way; but what concerns me is a lack of a hard work ethic! The expectation that someone else will do the hard/dirty work... etc.
I can say from my various very quite diverse experiences of the younger generation that I am concerend!
I can't wait till they replace the current teachers with "on line" resources (lessons and work packages) so students get a decent eduation provided from the best teachers money can buy so as to stop the rot.
I can't wait till they add back into schools, discipline (bring back the cane!), morals and honour and hard work and even mandatory team SPORTS.
Most of all I can't wait till we replace the "managers" of today; with "leaders" (HEROES) that can show they are not just lazy, overpaid, greedy, &*^&holes that don't care about something/someone other than themselves.
The "heros" of the younger generation are sorley missing... Just ask them who they aspire to.... what are their dreams and ambitions.... Its quite sad unless you like the E channel!
When do we hear about the good of the community, the good of the people? it's not just about money!
Maybe we should just stop all benefits over time so people can prepare themselves for retirement. The re directed tax into investment should grow (a swear word here) the economy and with lower taxes you can help yourself instead of the state helping you.
I am 47, live in a $1.2M house with a $300K mortgage on an income of $150KPA. I am saving for retirement through a fund from my employer and I will have cash by the time I am 65. I am not expecting super at all from the government.
WRT Council rates, I believe no one should sell their house if they cannot afford the rates. So what if granny lives in a $2M house that was brought for the same price as other areas 40 years ago. The question should be, why are council rates so high in the first place?
100% agree. rates as $ values are too high. Now we have a Mayor voted back in by less than 30% of voters (approx 50% of those who actually voted) who spends as though there is no tomorrow. Until local government is made accountable I believe it fair to refuse to pay rates if the money is spent irresponsibly as it is in Auckland.
It seems a bit rough when one works hard and saves and or invests in a retirement scheme of some sort to enshore a higher than average income in their later years gets their wings clipped by a way of means testing. Any govt payment to oldies in the form of retirement should not be means tested.
If people allow themselves to catch a dose of the almost incrurable disease known as consumerism , they will never be able to aford a house or little esle. We do not need a $5 wild b.. coffee with every tank of fuel or 6 cans of V and expensive food purchasers, or a flat screen in every room.
There dosen't need to be a war between the generations , we all need to think about the next day and the after that.
Bernard... ur headline makes it sound like these people are like .."pigs at the trough".
In fact... ur opening paragraph numbers are a little unbelievable ... in my view.
6 billion / 80,000 people = $75,000 per person....
Do u really think there are 80,000 retirees that are earning $75,000 per yr..???? ( I peronally don't know any )
R U sure it is not $6 billion between 80,000 + 35,000 + 318000 people. ( the numbers u state further in your story)
True leadership ... leads by example... So... it would be nice to see all MPs, forsake their own sweet super scheme... first ... before taking an axe to ours.
With the shifting demographics we are heading to a point where the promises of the past will simply not be able to be paid for... in the future.
American cities are finding this out.
Do u really think there are 80,000 retirees that are earning $75,000 per yr..????
It's a very plausible number - given many of these folks are 65+ but are not retired - in other words, they are still in the workforce and still earning well over that sum on an annual basis.
I know plenty!!!!!!
What I don't know is whether or not they have opted out of collecting super.
agree with Roelof (hows the flowers big guy)
but "d the benefit for a couple set at 66% of the average wage" is too high. wages change throughout NZ, with many on wages having to pay considerable rents. Stop the medical sector pigs in the trough for everyones' benefit, then the Super rate casn be brought down to realistic levels. More than half of NZ population earn less than "average" wage so 66% of average wage for people who have had 45 yrs to secure housing/retirement funding is rude
Good on you Bernard for highlighting this blatant inequality and greed. Means testing can't come soon enough. Greypower members, many BB's and their ilk are nothing more than whinging whining parasites who want the cake, eat it all themselves and bake another for themselves over and over with a gold card and discount on everything.
Gen X,Y and Z are waking up fast and man they are getting angry. Power and time is on their side
So, Joe Bludger never works in his life, has 15 kids to 15 different women and deserves a pension. Not only that he can have a nice room in a rest home and not get his house taken off him cos he dosnt have one.
Meanwhile Joe Slogger, works hard all his life, pays his taxes and gets to retirement only to be told "Go away bludger" and if you try to get into a rest home we will take your house off you.
Nice to see such fair minded, kind hearted people on this site.
Hello Elley , havn't seen you around here lately , good to have you back ..
... got the power on in Oxford this morning ? ... massive squall ripped through Rangiora , and all me washing's wet on the line !
Bernard's always playing the wealth card .... you can always guess it's a Sunday when you see an article in the NZ Herald bashing babyboomers &/or retirees .... Hickey's on the prowl ...
... as if those successful folk havn't paid bucket loads of taxes throughout their working/business life ...
And how about the moral hazard of sending the message to the citizens that you don't need to strive or succeed because government will secure you from cradle to grave ...
... go home , have a nap , we'll take care of everything for you .. .. yeah , right ...
Hi GBH! Actually, I've been busy working my bum off saving for my retirement ;) I guess that's what happens when it takes barely a week to be offered a 6-figure job.
Not that the money was the incentive, more the challenge of juggling it on top of 5 kids and a consulting business (and I didn't actually want the extra job but for some reason felt the need to reassure myself and confirm whether I still had a market value outside of our business after working from home for several years...obviously yes). But anyway, I'm going back to just consulting now and looking forward to catching my breath so I might drop by here once in a while. Truth is, I also got a bit over the 'same old, same old' slightly depressing conversations, older-generation bashing, succesful-people bashing etc.
Oxford was terrible this morning. We were up before 5am because of the wind and I had to go to Chch so left at 6am before it got even worse. I managed not to get blown off the road but hubby informed me that the school and daycare remained closed & we lost power for a few hours. But no damage to report and for us at least, the wind has gone down now. Wellington doesn't seem so lucky though.
'See' you around!
Are these 'oldies' not paying tax on their salaries, wages, income and are they not contributing to the funding of the government ? Why should there be outrage ? When they earn/earned they pay into the Super scheme in many ways, so why should they not get the Super ? Means testing is the government going back on the social contract. People earn and pay taxes at an higher level during their earning lives, in anticipation of government super. Why should they be denied for any reason ?
Well done SmoKey for putting your finger on the issue:
Means testing is the government going back on the social contract.
It does form part of the NZ social contract - so hardly a surprise it brings out the emotions in people.
The questions might be:
Can we afford the current contract in it's current form?
*If* there really is a need to renegotiate the social contract what are the ground rules for doing so?
No they are not paying tax on their property gains which is where the vast majority of their wealth came from.
You would clearly prefer that future generations get denied the promise of super at 65 instead, as long as it's not your generation?
There is a long history of paying out for baby boomers and then pulling the pin on later generations
- Final salary pensions are no longer available to younger generations even though people working in those industries are having to pay for those schemes baby boomers are enjoying
- Free tertiary education is no longer available to younger generations
- Cheap government loans for housing are no longer available
The list goes on...
The vast majority of baby boomers I know made the bulk of their wealth from property gains. Of course there are exceptions but my point stands.
In a falling interest rate environment as we have had for decades there is a huge wealth transfer to property owners (older generations) from first time buyers (younger generations). Please refute that argument with better logic than calling me a 'world owes me' generation.
But that was the plan - we transferred income producing jobs to countries with much lower standards of living and maintained our own with cheap debt. Corporations demanded we do so - the data confirming transfer of local wealth from labour to capital reinforces the contention.
How many of those 80,000 are paying anything like a fair share of their taxes. Probably only a few. That is what outrages me more than anything. If they did pay their fair share, then they will have contributed far more than anybody else, in which case I would not grudge them the pension. As high tax payers, the very very wealty (if they are paying their far share of tax) are the ones who will probably benefit most if less people recieve the pension, and the poor souls in the grey middle zone who my find it helpful could be viewed to be treated unfairly if they do not recieve it.
What also outrages me is the number of people right through the income spectrum who dodge taxes with under the counter payments, GST dodging, and illegal imigrants who are working totally outside the tax system. I would support totally doing away with cash and tracking all cash flows.
You assume that only a few of those 80,000 are paying anything like their fair share of their taxes, and so you are outraged.
On precisely the same evidence base I assume that most of them are paying, and have paid throughout their lives, the taxes required of them, ie far more than anybody else, and so I do not grudge them the pension.
I have always felt there should be a public register of all those folks who voluntarily opt out of their universal super. A kind of positive reinforcement of snob status. Most upstanding wealthy folk would want to be on it - as not being on it would be a serious embarrassment/admission that they were stingy old b..tards.
Universal super was always rather silly but then I'd rather those who didn't need it opted out voluntarily as opposed to government needing to apply a means test across the board. I'd like to think we're a mature, ethical and fair society and that those amongst us who don't need the benefit just simply don't collect it because that is the right thing to do.
Nope, as things stand, I will need it, however if I won Lotto or some long lost uncle left me a poltice, then I would take up the option not to receive it at the time, and would probably look at donating it otherwise, but it would be better if I didn't pick it up in the first place and just have the disher outerer of it do the donating
Of course if your situation changed later in life you would have the option to pick super up again. I believe the whole idea is a voluntary thing anyway, so what was your problem?
It would work. Every retired public servant and/or ex politico that gets called back in to do a consultancy job or take on an cushy directorship role
e.g. http://en.wikipedia.org/wiki/Margaret_Bazley
.. would have to pass the "public good" test - as the politicos would be sure to check the register before such time as they made an appointment.
Just think of the public outrage if we found Dame Margaret was collecting the super as well as the very handsome remuneration she gets at the helm of ECan.
Sometimes, Bernard, you're like a persistent roid, just won't settle and not something I can either stand nor sit for.......between your Boomer fixation and your obvious gerontophobia it must cause you anxiety to know you will be among our number sooner than you think.
While we are on the subject of means testing, I doubt you'd pass flogging a dead horse in public the way you do.....it just doesn't get any meaner than that.
... meebee we need a Hickeyroidal ointment for all those well meaning folk in our society who get Bernard's boot up their bum each Sunday morning ...
... so it's wealthy retirees this time huh ... tsk tsk ...naughty successful people , how dare they be well off .... it doesn't pay to be a tall poppy in NZ , guys !
I am sure the tax-planners , the accountants , and the bureaucrats of our proud nation are even now , erecting a statue of Bernard , in gratitiude to his sterling effort to make them busier and richer than ever before ...
The world according to Hickey: The world began yesterday.
While cleaning out the cobwebs from the limbic brain and re-activating the synapses, I recall from my early days at the Inland Revenue Dept, as a mere junior assessment clerk, before the days of computers, we did it manually, there was a disproportionately high number of taxpayers receiving universal super. Even then. Caused great consternation among the elderly. It was half the OAP, and they gave back 66% of it in tax. A lot of high income people got it. (yes they had em in those days) It was automatic. Those that didn't want the bother (and embarrassment) of it and tried to get out of receiving it found the bureaucratic hassle was too great. It was easier to accept it and get on with life.
Someone is trying to re-establish his relevancy. Wish he would consult the elderhood occasionally
The thing is that that money will either get inherited by the younger generation when the old people die. Or the government will get a lot of it, when the old people go into a rest home. Or reirement villages (property companies) will get a lot of it with their license to occupy. So the money will get recycled back into the economy anyway.
But it doesn't seem right thatsome old people are earning more in retirement, than they earnt prior to 65, yet can work for less hours. Perhaps reduce it if they work, like they do for people on the dole who work parttime hours.
But those people did work and pay their taxes, so they are entitled to it, and it is no differerent to a private super fund. The only difference is that it get paid out of our taxes being paid now, as governments have been too shortsighted to have an actual fund to pay for it. Well apart from the Cullen fund.
The problem is our governments policies are too shortsighted, and many are just vote bribes. eg interest free student loans, just to get the student vote numbers.
There are many reasons some people choose to work past 65. One big one being the lack of provision for their own retirement. If means testing comes in, there will be an incentive to stop work immediately. Whether they decide to stop work or not, less will be spent on dinners out, less holidays, less money flowing in the economy, less funds under management and a lower tax take.
However, it may free up one job for a younger person. This is the only thing of net benefit that I can see coming from this proposal.
Been thinking about this whole thing and have come to the conclusion that one way or the other, the generations below pay for the pensions or care of the old, the way it has been forever, whether done by the individual family or by the state.
The trouble is, all this promoting of providing for one's own retirement, given that Kiwisaver alone will never be enough, means that you have to gain your nest egg off someone else. Many have dipped into the residential property market and in my mind this method is just as much taking it off the next generation as a pay as you go pension scheme. It relies on there being a yawing gap between house prices and incomes, forcing people to rent because they cannot buy Of course, the next question is how do the people who will never own or will come to it too late in life, save for retirement?
I think we should be aiming for a higher contribution pension scheme, perhaps compulsory, but society needs to come to terms with the fact that women in general earn less and have to take time out to bear kids, we need to realise that the old saw "it takes a village to raise a child" is just as true today as ever it was. Women's contribution to society in the manner that only women are able to contribute must be acknowledged and supported.
In the end, the answer is people remaining contributing to society for as long as possible and I include voluntary work and small businesses where older people could be engaged that does not displace younger people in the general workforce.
In any case, we have got to have a look at the way we run out societies and shifting closer to the law of the jungle is most definitely not the way to go.
If you have already paid for your pensions you would not need a state pension funded by taxpayers...
The prospect facing the current generation entering the workforce is one where you have to pay for your own pension while at the same time paying for the current far more generous state pensions they will ever enjoy.
What rubbish, you have a generation who have worked there guts out taxed for the everything the local and central govt can squeeze out of them, they deserve to get some pocket money to see them through whether they need it or not. Why should folk be penalised for being successful, we all make our own beds with the choices we make, some are just neater than others.
Well there is often luck involved, try telling a peasant in china he's just as lucky as you or I.
Then ability & IQ...funny thing is I thanky my lucky stars I was handed a decent IQ and abilty....
Now in terms of pensions, sorry but OAPs will be 2x the number they now are and expect the state pension to be paid by the workers who have also paid for their own education and been left far less resources, lots of polution and over-popolation to deal with, plus AGW...
So this and the last generation have dumped on the next 2 and expect a handout in their wallet and state healthcare...
So really I have a moral problem with your position.
regards
Assuming a single pensioner earning $410.32/week super ($21,336/year) and earning an additional $75,000/year. This person would pay $24,348/year in income tax so would be a net income tax payer (they pay more in tax than they receive in super by $3,012). Assuming they spend half of their after tax income, they will be paying a further $5400 in GST.
Well I dont agree on the OBR and after all you dont have to put your money in a bank, its not compulsory unlike taxes....
Otherwise, yep, inevitable....as the state struggles for income it will tax thse that "can" pay, you only have to look at greece for that.
regards
The rich will lobby to protect themselves (which will be successful until the populace is starving - see Marie Antoinette) and the poor have nothing to give so expect squeezing of the middle classes. Cash/income is easier to identify and steal so will be targeted first - OBR, depressed interest rates, QE, raised taxes, reduced benefits. Asset stripping will come later.
If we had more available funds ( by kicking the spit out of wealthy retirees ) we could fund some decent dairy farm research , as the Brits have done ...
http://www.theguardian.com/uk/2006/aug/23/ruralaffairs.uknews2
I would argue the net wealth transfer to the elderly from first time buyers is much more significant.
I just think if you want to mention the impact on baby boomers from the reduced rate on their savings you also have to mention the massive boost in their properrty values. Otherwise you are painting a very one sided picture...
From the Retirement Commission's report:
People reaching age 65 in1970 could on average expect 13.1 years of remaining lifespan (male) / 17.4 years (female). Today's 65-year-olds stand to receive NZS for over 20 years (men) / 23 years (women). Today's 25-year-olds will live on average for over 25 years (men) / 27 years (women) after the age of 65.
Who is right ?
(a) They say there is an obesity epidemic among the young leading to chronic diabetes and a shortened life span
(b) Over the past 5 years there has been a 600% increase in the number of hospital admissions due to methamphetamine abuse and other related psychoses. One assumes these hospital admissions are not from the older demographics.
Such events suggest a decreased life expectancy among future retirees
Members of the population who are in these categories potentially become pensioners reliant on the state long before 65 and long before their time.
Dont know about betting on it.
In principle I find it difficult argue "against" raising the age of retirement for all the reasons you have set out.
However, the permutations are going to change. Based on the facts above, increasing numbers will be retiring before 65 and imposing an ever increasing burden on the health and social welfare systems, regardless of the official retirement age.
A documentary last night on TV set about examining the causes of an explosion in the numbers of surgical procedures for hip and knee and ankle replacements. The medicos concluded it is due to obesity and the added strain of carrying so much excess weight on the body.
The documentary is not wrong. I see a lot of slim oldies still hobbling around on their crook knees (age and hard work/exercise have caught up) and opting not to have them replaced.. Recently visited USA and becos I was hobbling (no I'm not having them replaced) a young very obese woman (looked like in her early 30's) told me that she had had both her knees replaced and I should too!! Not likely - they only last ten years at most so that young woman will probably have three more replacements if she lasts that long!
Agree - Pension age needs to be raised in the long term.
That stat was the one that really stuck out to me. 7 additional years of longevity over and above what it was in 1970. It's not as if human physiology has evolved in those 40 years to the extent that we live that much longer; and it's not like we are living a more physically active lifestyle or eating more healthy food stuffs .. quite the opposite.
So, what's changed in those 40 years?
Medical intervention.
It's a double whammy for the young in the West. Spend more on old folks pensions because they live longer and spend more on old folks medical interventions because ??? - at a time when there are plain old more old folks (as a percentage of overall population) than there have ever been before.
I'm one of the so-called enlightened rich, and it's talk like this that makes me feel even better about my decision to step out of the workforce a decade early, thus denying the grasping buggers a few $100k of tax that would have come from my future efforts. No more from me, you jealous soclialists.
Us "jealous socialists" as you like to call us, are far, far more concerned about others, especially those less fortunate, for whatever reason, than any selfish capitalist will ever be. Notice how the likes of you talk of me, me, mine, mine while the socialists talk more in terms of we, us. That alone helps me decide which I would rather be
And I have found the movies really entertaining. I haven't ever watched any of them, but the news around them has always been hilarious.
http://www.avclub.com/articles/atlas-shrugged-producers-turn-to-kicksta…
You would think so, and it would make me feel good.
However younger "workers" don't seem to want to do what I did, it's not cool enough, or beneath them, or too hard/boring/whatever (it's actually none of those things, but perception is reality, right?). So the pie shrinks a little, and those "less fortunate for whatever reason" (apathy mostly, in my experience) get to be a little hungrier.
I'll vote for you , Zanyzane , but I suspect that very few otheres will !
... you're right though , that a CGT creates more tax distortions and avoidances ... it needs to be based across all assets , including the family home ...
Cunny ain't gonna slap a CGT on his wife's millionaire mansion in Herne Bay , is he !
I've been in oz under a CGT regime long enough to know it's a dumb tax that doesn't work too well. Cunny will know that. If he doesnt then he should.
There was a case about 12 months ago of a US leverage buyout firm who the year before bought Myers Department Stores, a public company, and took it private. Stripped out the costs, sold all the land and buildings, leased them all back, then floated the company back on the ASX market. Made a cool $1 billion in profit, and skipped out of the country with the cash within a week. The ATO tried to put a clamp on the funds but were a week too late. So much for CGT
Yes of course its a chicken tax, though in effect most homeowners will be paying other taxes like PAYE. So a CGT really catches ppl like yourself whom I can but assume have got significant capital gains that now you will be taxed on instead of tax free.
seems fair to me.
regards
Fact : the current non-means tested government super at age 65 is not sustainable indefinitely.
All the baby boomers on here saying it would be such an injustice to change it seem perfectly happy for the injustice to be inflicted upon a younger generation instead, as long as it doesn't happen to them...
Seems Treasury may not agree with you Julz: So while some people might find a means-tested retirement income system appealing on the grounds that it directs the state's resources to those who need them the most, the practical barriers are difficult to get around.
http://www.treasury.govt.nz/government/longterm/fiscalposition/2013/affordingourfuture/25.htm
At some stage in the future if the means testing doesn't change the age or the amount will have to. My point is that the current cost is not sustainable given the demographic changes and increased life expectancy.
You can't argue that it would be injust to change it now when we all know it will have to be changed at some point. "Justice" for baby boomers simply means more "injustice" for future generations.
Define "sustainable". The current cost of NZS is about 4% of GDP; it is expected to peak and then level out just below 8% of GDP. Is that really unsustainable? Many OECD countries are already paying more than that, even before their demographically-driven cost increases kick in.
The problem with means testing is that it's quite liable to cost more, in terms of administrative complexity and the opportunity costs arising from the disincentivisation of working and saving, and the perverse incentivisation of inefficient uses of money, than it costs simply to give everybody the same regardless of their circumstances.
Not to say that there should be no change. It can't be unjust to expect the generation that is enjoying the benefits of longer healthier lives, to bear at least some of the cost of that as well. But means testing wouldn't be my favourite of the options.
Increasing the deficit each year by another 4% is certainly unsustainable... If we keep the super in its current form the cash has to come from somewhere and I suspect that burden wont be falling on the baby boomer generation.
I would also prefer if it wasn't means tested but would like to see capital gains tax on property to make up the shortfall. Capital gains has contributed a vast amount of cash for the wealthy baby boomers and for reasons I will never understand that wealth has never contributed to our tax take.
Bernard
Commentary like this only speaks to one side of the coin. If equality in pension distribution is a horrible outcome then you need to consider the alternative. The American social security system is based on the premise that the more you put into the system via taxation the more you ought to be able to collect at the other end. All your lawyers, doctors and retired judges retire on higher social security in the US than the average contributor to the system and why not?
Why should the system not be proportionate, rather than disadvantageous at the wealthier end of the scale. This kiwi desire for equality is really odd if it means treating one segment punitively given they already gave more to the tax system in the first place.
So we should not only be talking about means testing, we should be talking about equitable contribution and return. My point is simple - the moee you dig into the boundaries of this system the greater the complexity.
The real problem is that Universal Superannuation here is being discussed in isolation from real behavior. What factual information exists for the transfer of wealth from parents to children? My family had an unwritten social contract whereby my wife and I paid for all of our children's costs to the end of their formal education. One Doctor, one Engineer and one Masters with distinction later, we have set up a Family Trust to assist our 5 grandchildren's education and have helped one child into her first home. This continues. We both worked hard to achieve professional success at a moderate level, and saved, using the philosophy of paying as we went for our needs, not our wants, and saving something out of every pay packet for a "rainy day". My wife and I both come from humble State Home/Railways Housing backgrounds and rural state schooling. We were brought up by parents who had nothing extra, but we were fed, housed, clothed (handdowns) and loved to bits. Apart from some problems with booze on the male side of both families, things were not too bad and we all stuck together. We ended up with some property, some shares and other investments, and two paid for Superannuations which mean we are at present no burden on family at all after nearly 49 years of marriage.
I despair when I read about the youngsters who can't wait until they wrench a perceived advantage from their elders without ticking off the costs of the environment which they have started to grow up in. The social contract we grew up in was successful though inevitably flawed cause people created it, but it was a hell of a lot better than the lives of hundreds of millions of people that we have worked with and shared their lives in places like Indonesia, Malaysia, India, Thailand etc. If we get to the stage of counting who costs whom what, let the callow youth start adding up the real costs of the infrastructure, the framework of society which they grew up in NZ, and what others eg Maori and other immigrants have added to their life experience. We all have gained and continue to gain from the acculturation gained by osmosis by starting life here in NZ. Count your blessings
The real problem is that Universal Superannuation here is being discussed in isolation from real behavior. What factual information exists for the transfer of wealth from parents to children? My family had an unwritten social contract whereby my wife and I paid for all of our children's costs to the end of their formal education. One Doctor, one Engineer and one Masters with distinction later, we have set up a Family Trust to assist our 5 grandchildren's education and have helped one child into her first home. This continues. We both worked hard to achieve professional success at a moderate level, and saved, using the philosophy of paying as we went for our needs, not our wants, and saving something out of every pay packet for a "rainy day". My wife and I both come from humble State Home/Railways Housing backgrounds and rural state schooling. We were brought up by parents who had nothing extra, but we were fed, housed, clothed (handdowns) and loved to bits. Apart from some problems with booze on the male side of both families, things were not too bad and we all stuck together. We ended up with some property, some shares and other investments, and two paid for Superannuations which mean we are at present no burden on family at all after nearly 49 years of marriage.
I despair when I read about the youngsters who can't wait until they wrench a perceived advantage from their elders without ticking off the costs of the environment which they have started to grow up in. The social contract we grew up in was successful though inevitably flawed cause people created it, but it was a hell of a lot better than the lives of hundreds of millions of people that we have worked with and shared their lives in places like Indonesia, Malaysia, India, Thailand etc. If we get to the stage of counting who costs whom what, let the callow youth start adding up the real costs of the infrastructure, the framework of society which they grew up in NZ, and what others eg Maori and other immigrants have added to their life experience. We all have gained and continue to gain from the acculturation gained by osmosis by starting life here in NZ. Count your blessings
One of the best posts on this site I have read for a long time. So, so tired of the generation bashing that goes on. You are born when you are born etc. I am not convinced that people in their 60's plus are all wealthy property owners. Most just own their own homes for which they worked their butts off during their lives and beejaym's post echos what most of that generation at least tried to do. For the good of their families and not to be a burden on society and their families in their old age. We are mostly a generation of very independent people who tried our best.
beejaym, you are so right in saying that we are all in it together and that, in most cases, inter-generational help is the normal behaviour, etc., etc.
However, the main article was written to create controversy and as such to be attractive to attention-grabbing media such as the NZ Herald and, to an extent, this site. If the article talked about inter-generational unity and assistance (the normal behaviour), would it generate the same amount of traffic and comments? - Of course not. Hence the provocative talk about conflict, outrage, etc. Pity it works for attention seeking "journos".
All you oap's take note.
Before the xyz generation of lay abouts steal anymore of yer hard earned savings, transfer yer wealth to one of these places itemised here below and have a nice life at reasonable cost.
10 of the best.
Not them fraudulent burghers in Windy Wellington and Parliament and severly over rated Auckland and the Kaipara.
May want to give this city a miss...so maybe not here.
http://www.huffingtonpost.com/2013/10/12/detroit-loan-350-million-debt_n_4090624.html
I know they call it loot, but there is a limit.
Interesting post Bernard.
I'm definately a right winger, but grudgingly will need to go Labour in the next election as in my opinion, Nationals policies are skewed towards the older age generations at the expense of Gen Y and Z. In particular, holding the retirement age; the tax treatment of investment properties and lack of support for first home buyers in the face of increased LVR.
I agree with Bernard, that unfortunately too many of us of younger generations are ignorant or disengaged with the policitcal system and how it impacts us, to our detriment. The sqeaky wheel gets the grease...
My wife's grandmother is 101 years old. She has never applied for or received NZ Superannuation or any benefit for that matter. Asked why... she said "It isn't right for me to do so". Her husband left her a home and some money in the bank 20 years ago when he passed to survive on.. I'm not sure there is much left now... I not sure many of our wealthy retired ex- corporate businessmen and woman would be willing to do the same? Imagine the money that could be saved.
400 to 500,000 family Trusts in NZ
How many of these are being used so mum (or dad) who is 65 can claim the married (double) rate of Nat Super for themselves and underage spouse (super is income tested when an underage spouse is included)? There are thousands out there rorting the welfare system in his way... but they are left alone as they are the Grey voters.
I find the intergenerational squabbling which is at the heart of this debate so very petty, though a little funny. Its just symptomatic of the mutual incomprehension of between generations and the historical ignorance of both. One could excuse Bernard, because he undoubtedly was raised in an age where his peers were wearing skin tight, torn jeans, and flannel and listening to the angst ladden lyrics of Kurt Cobain and Nirvana.
Chris Trotter made some very pertinent points on this subject on his blog. He disclosed that the primary beneficiaries of the dramatic changes of the neoliberal reforms of the 1980s were actually the War Baby generation, those born in the 1930s and 1940s. They were the one's who gained most from the dramatic cuts in the top tax rates because they of an age where they were at the peak of their earning potential, they already had a pool of savings which capitalized upon the double digit interest rates of the 1980s, they were the ones who had the equity to provide for the collateral which banks demanded to secure their mortgages when the house values were in a historic trough, they had the most to gain when worker's incomes declined in real terms in the 1980s and 1990s. The baby boomers have only been catching up in earnings potential which was forgone, due to the turbulent changes in the country's labour market thanks to Roger Douglas' reforms, himself of the War Baby Generation.
Speaking as an early Gen Y myself, I've noticed that many Gen Xers and Gen Ys haven't turned their noses up at the intergenerational transfers such as the Working for Families. I don't draw upon it myself, not having a family.
I find the intergenerational squabbling which is at the heart of this debate so very petty, though a little funny. Its just symptomatic of the mutual incomprehension of between generations and the historical ignorance of both. One could excuse Bernard, because he undoubtedly was raised in an age where his peers were wearing skin tight, torn jeans, and flannel and listening to the angst ladden lyrics of Kurt Cobain and Nirvana.
Chris Trotter made some very pertinent points on this subject on his blog. He disclosed that the primary beneficiaries of the dramatic changes of the neoliberal reforms of the 1980s were actually the War Baby generation, those born in the 1930s and 1940s. They were the one's who gained most from the dramatic cuts in the top tax rates because they of an age where they were at the peak of their earning potential, they already had a pool of savings which capitalized upon the double digit interest rates of the 1980s, they were the ones who had the equity to provide for the collateral which banks demanded to secure their mortgages when the house values were in a historic trough, they had the most to gain when worker's incomes declined in real terms in the 1980s and 1990s. The baby boomers have only been catching up in earnings potential which was forgone, due to the turbulent changes in the country's labour market thanks to Roger Douglas' reforms, himself of the War Baby Generation.
Speaking as an early Gen Y myself, I've noticed that many Gen Xers and Gen Ys haven't turned their noses up at the intergenerational transfers such as the Working for Families. I don't draw upon it myself, not having a family.
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