United Future leader Peter Dunne is calling for KiwiSaver to be compulsory and for a revamp of how Superannuation can be paid out, unveiling a policy that would allow people to be able to claim Super from 60 years of age.
Dunne, who is also Minister of Revenue in the current National-led government, is under threat in his Ohariu-Belmont seat in Wellington, with Labour's Charles Chauvel and National's Katrina Shanks thought to be closing in fast.
Today Dunne called for people to be able to claim Super from 60, although the regular payments from then would be lower than if a person began claiming Super at 65. Likewise, if a person decided to hold off until they reached 70, Dunne's policy would see them receive higher Super payments than if they had signed up earlier.
“Kiwis would then be able to manage their retirement age and lifestyle – choices they currently do not have – and it would be cost neutral with the current scheme,” Dunne said in a media release.
“Each year below 65 that superannuation would be claimed down to 60, would see a small reduction, and each year over 65 up to 70, it would be enhanced. The sustainability arguments around superannuation, and whether it should be 65 or 67, then become redundant,” Dunne said.
“People can then do their own maths and work out what works best for them based on their lifestyle and aspirations,” he said.
'Index for inflation before inflation figures'
Meanwhile, Dunne also called for a change in the way Super payments were adjusted for inflation, saying that the formula should be calculated on forecast changes in the Consumers Price Index (CPI) and wage rates over the next year.
"Currently adjustments are made after the event, creating a time lag that cheats superannuitants of their full entitlement. Any unforeseen changes to inflation or wages would be adjusted each April, in favour of superannuitants," Dunne said.
The numbers (taken from Dunne's release)
Questions and Answers:
What is the current cost of superannuation to the country and what are the future projected costs?
Treasury, in the Budget Economic and Fiscal Update 2011, forecasts the expense of NZ Super in 2011 to be $8,833,000,000. In 2010, it was $8,290,000,000.
In the same document, Treasury forecasted the expense of New Zealand Superannuation in 2015 to be $11,666,000,000.
While there are no official forecasts beyond 2015, Treasury projections are:
2020: $15,979,000,000
2030: $29,652,000,000
How sustainable is UnitedFuture’s superannuation policy?
The changes would be cost-neutral for government at whatever level of uptake at any age from 60 to 70.
Individuals will be free to choose what works best for them. If neither earlier nor later retirement suits them, they could stick to the current retirement age of 65 at the current level of superannuation. It is all about choice that is not there today.
Is it anticipated that larger number of people would take super earlier than 65, or move it out further, and why?
We have not anticipated either, nor do we intend to. It would be entirely up to individuals, based on their circumstances, to decide what works best for them. The formula is cost neutral to government on the current costs of superannuation.
If people are happy to work beyond 65, they would have the opportunity to delay their superannuation and receive a higher level when they do claim it up to the age of 70.
People choosing to retire earlier than 65 would receive a lesser rate of superannuation to reflect that they will potentially be drawing it for longer.
The two underlying principles of this policy are choice and cost neutrality. We want to provide people with increased flexibility around when they retire, without leaving them or government, out-of-pocket.
Anecdotal feedback suggest that more and more people still feel capable and motivated to work beyond 65 and many do that now.
The Numbers:
Give people the option of choosing to receive New Zealand Superannuation at a reduced rate from the age of 60, or at an enhanced rate from the age of 70, if they delay uptake till that time.
What it means in dollar terms based on today’s superannuation:
Single Rate
60 = $248.79
61 = $264.68
62 = $281.57
63 = $299.54
64 = $318.66
65 = $339 per week (current rate)
66 = $372.90
67 = $410.19
68 = $451.21
69 = $496.33
70 = $545.96
Couples Rate
60 = $383.11
61 = $407.56
62 = $433.57
63 = $461.24
64 = $490.98
65 = $522 per week (current rate)
66 = $574.20
67 = $631.62
68 = $694.78
69 = $764.26
70 = $840.69
(Updates with figures)
49 Comments
Well I don't think it is such a silly idea. At least it shows some flexibility in thinking that is sadly lacking in the current retirement commission whose idea of originality is to do what everybody else does.
The fact is that Maori and Polynesians don’t live as long in NZ as European and Asian New Zealanders do. To throw the retirement age out to 67 or even 70 would be the imposition of a gross injustice on them. Their income levels are already low, and many work in manual labour which is often no longer possible much beyond the age of 65. The suggestion to increase the age of eligibility for National Super to 67 places an intolerable burden on them.
Having a flexible retirement age to me makes sense. One size does not fit all and we shouldn’t be trying to make it so. Why shouldn’t a person be able to defer retirement and collecting National Superannuation until they are 67 or 70 if they so choose? If some collect it from an earlier date then yes they get paid a lesser rate and for those who defer it they get paid at a higher rate. The Americans have a similar system wrt to Social Security I understand. And they have a CGT too, so we should be doing what they are doing, right Bernard?
To me this is the real issue that needs to be addressed, collecting National Super while still in full time employment. That just doesn’t make any sense to me at all and it never has. Set the retirement age between 62-70, with the base line at 66. If you wish to continue to work you can take a deferment on retirement and collecting National Super up to the age of 70, or you can choose to retire early from 62. And the rate of payment depends on the age of retirement.
But let’s make it that you cannot be engaged in full time work and collect National Super. For the self-employed that would mean a means test.
Given how small payments of National Super actually are I don't think that withholding it from those in full time employment will in any way discourage older workers from working. In fact it may even have the opposite effect. But what it will do is provide a considerable cost saving to the welfare budget, and that's a good thing.
I am dead set, on principle, against paying welfare to the middle classes and to those in full time employment no matter what their age is. So for me that means no WFF and no National Super. We have got to stop Govt. subsidising wages in this country through the welfare system if we are to ever lift this nation out of being a low wage economy.
I'm with David - flexibility makes sense. I also feel that if we are to retain young NZers in NZ, then the quicker the existing BB generation retire - the earlier the promotional opportunities for the younger population. Many BBers forget that their promotion to management was very early in relative terms compared to today. Just look at Parliament for example, Many of those still there have been there since their 30s. Positions of responsibility in many sectors are overloaded with managers that have been managers for in excess of 25 years.
We need to de-grey our business/decision-making executive.
"For the self-employed that would mean a means test" but once not working arent we all self employed in odd jobs? or black market economy?
;]
Dunne is looking for some campaign platforms I guess probably out of a job this time and unless he gets a cushy ambassadorship he's toast...yeah
:D
Full time employment but no pension at 65...dunno....its kind of catch 22....
I agree on not raising as it will dis-advantage maori etc....but problem is I dont think 65 is sustainable. For myself I suspect given the future I see coming I will be lucky to "retire" at 70....I think its going to be hard.....and Im going to have to work some days everyweek to suppliment my pension....if there is no pension thats full weeks, not fun past 65.
regards
I am a Baby Boomer , and would love this , but would I (a) vote for it or (b) stop working in a few years ?
Not on your life , it would add a whole chunk of our population onto the welfare system , and we cant afford any more of this cradle - to -grave welfare nonsense .
Although it is highly likely Dunne is slicing the pork, I have to say 65 is bloody unfair on many who cark it between 60 and 65 for whatever reason...if it doesn't boost the state splurge then why not give it a go. It might release a few job openings for those sucking on the winz tit.
This is very wonky thinking:
“Kiwis would then be able to manage their retirement age and lifestyle – choices they currently do not have..."
But the proposal is to make Kiwi Saver compulsory - thus removing all my investment options for almost my entire working life.
So as to give me choices when I hit 60.
"Currently adjustments are made after the event, creating a time lag that cheats superannuitants of their full entitlement..."
Superannuation in this country is paid out of tax dollars raised this year.
There is no fund that was squirreled away and no investments have been made by those being paid out. All the tax money those people paid in their working lifetime was spent, the government has nothing but debts.
So really government superannuation is simply a gift from current tax payers to people over a certain age.
So in what sense is it an "entitlement"?
This is wrong:
It's their own Super, earnt by being a contributing member of society until the golden/grey years.
NZ Super is a universal benefit - it's not got anything to do with "earning" - you don't have to have ever held a job (i.e. paid taxes, or as you say have been a "contributing member" of society) in order to collect super. And the amount you collect is fixed no matter how much or little you "contributed" (or not) in taxes over the years.
So, it's not an entitlement, any more than unemployment, or the DPB is an entitlement. It's a universal welfare benefit for over 65s.
"It reflects that the Super entitlement is your money..."
But that's simply not true.
Our current superannuation scheme started in 1977 totally without funding. Not until the Cullen Fund was a single dollar saved for the future.
So someone working in 1985 who retires is NOT getting their own money back. It certainly wasn't taken out of their taxation dollars.
It's someone else's money they are giving you.
Whose money it is is not the issue. Whether or not it was funded, the entitlement remained in place. Yes, we can look back and say 'well that was a silly thing to do, Mr. Muldoon!" but that is not the fault of those who currently have the entitlement. Scrap the pension today, by all mean; but it will still be paid out, regardless, under the guise of another, equally unfunded, scheme. Just like the unemployment roll falls; but the sickness beneficiaries increase!
So are you paying into your provision for the unemployment benefit, in case you ever need it? Should you not be, then should there be none for you if you lose your job because your employer fails? ( It like the pension , is a non funded Government social support mechanism paid for out of current taxation) You are entitled to unemployment support if you qualify. And in that case I shall pay for it. Or how else will you?
There are two problems with your comparison.
Firstly population wide superannuation is not in the same class as social welfare for the under privileged.
Second, when I look up the meaning of the word "superannuation" in my dictionary it says -- a regular payment made into a fund, aka. a superannuation fund.
Which takes us back to the original point -- people taking money from the government in pension form did not make any payments into any funds until 2001. It's not superannuation - it's social welfare.
And if it's welfare, that's more like charity and less like entitlement.
And did you look up 'entitlement'? I'll save you the bother :" a right to benefits specified especially by law or contract; a government program providing benefits to members of a specified group; also : funds supporting or distributed by such a program "
You're not making any headway at all.
The only point you appear to be making is it's an entitlement because it's in the law. And that's all. But even in your entitlement description it mentions: funds supporting…
And the point that it's in current law so it's my right could seem somewhat petty if you don't address the root problem - who pays?
There is an injustice in making younger workers pay a wage to older works simply because they didn't save for their retirement.
It is their money, in the same way other investments expecting Future Value, return value.
Perhpas you should study economics and investment a bit better before contributing.
If that were the case, it wouldn't be a universal flat rate. An investment pays you back in proportion to what you put in, but people don't get NZS in proportion to the tax they've paid in taxes. Most of them get far more than they've paid on an individual basis, and future generations will be getting far more than they've paid on a collectie basis.
In any case you have a somewhat odd concept of "investment" and "entitlement". Let me illustrate:
Man goes into a pub and meets a woman. She explicitly promises him sex in exchange for a drink. He buys her a drink.
Man goes into a pub and buys a drink for a woman.
Man goes into a pub and buys a drink for a bloke who tells him that in exchange, he can have sex with that woman over there (She has no knowledge of the conversation or of either man).
In each case the man has made the same "investment" - he has paid the price of a drink. He may genuinely have an expectation that he will get sex in return. But can it really be argued that his "entitlement" - ie the woman's obligation - is the same in each case?
If there is no arrangement better the woman and the wannabe pimp, then he is just being a Socialist, trying to get social gain from assets which don't belong to him. One which is traditionallysorted out by the womans' male friends and brothers....
But that's precisely the point here.
John Key can take your money and promise, on behalf of this Government, that you will get Super later, until he is blue in the face.
But the fact is that he is making that promise without the knowledge or the consent of the people who will have to deliver on it, and who may or may not be happy to do so - tomorrow's tax payers, who are unlikely to get the option to sort him out, traditionally or otherwise.
"Your funds are -i-n-v-e-s-t-e-d-"
"People paying taxes to a democratic or republic government are investing in the countries infrastructure, and their own future."
So you think taxes are the same as investments.
Well, I wonder how all that investing has gone - our government must be so rich after 40 years of investment returns. Oh dear, reality trumps fantasy - the government has nothing.
Because sadly taxes aren't investments in a financial sense.
What do you call the roads you drive around on? They are an asset that taxpayers substantially prior to, but including, you invested in to enhace the running of the country ( try getting your manufactued goods to port without them!). Dividends from investment come in many forms. Not solely a cash return on asset. The roads 'you buy' are an investment for you, and your children; as your parents so invested for themselves, and you, and their grandchildren.
This is wanting your cake and eat it too.
You want to argue a wide definition of assets to include things that give zero money return, like roads.
But you want your superannuation paid in money and not the joy of nice roads.
If you're prepared for your superannuation to be simply the benefits of lovely roads and airports and not cash then your argument is valid.
If you don't save cash for your future -- there won't be any when you get there.
I tell you what. Why don't we do what the Portuguese did when they left their colonies. I'll take all the roads that I have paid for, and leave you to drive about on the ones that you have. Or the 'money' that I paid to leave you with my roads, is required of you to repay in kind. Sounds fair to me ( NB: Mozambique had its roads ripped up;' its electricity grids demolished; sewers filled with concrete etc and handed to the next generation - who obviously weren't colonists. They took what they had 'paid for' when they left)
No one can retrospectively pay for those that have gone before! We haven't, to my knowledge, invented time travel yet. And if by that you mean 'I didn't pay for the pensions of my elders", I'd say, I did what was in vogue at the time, as I do now.So we can only pay for those that come after us. Life isn't going to end with my, your or our childrens generations, and that's why taxation in a civilised society pays for this and the future generations. Its has always been that way, and can be no other. The funds for the current pension scheme come from current taxation. Whether this is right or wrong is immaterial. It is a fact. And if you have read the excellent posts of mist42nz ( several of them) above, you will see he has explained why, far better than I can.
It's not a question of the facts, they aren't in dispute.
It's a question of sustainability. You can only usefully flog a horse until it is dead, after which time it's an act of insanity.
And whether that horse lives or dies is the most material issue to the survival of the system.
And isn't sustainability being addressed by Kiwisaver, as a start? I doubt its the solution in its current form ( In my opinion we had the right ideas before Muldoon scrapped them. But neither I nor you can do anything about that) but 'the horse' is always flogged to within an inch of its life! That's politics.
Good one Dunie, here is another line of thought from a mate in England....Please find below our suggestion for fixing the UK's economy.
Instead of giving billions of pounds to banks that will squander the money on lavish parties and unearned bonuses, use the following plan.
You can call it the Patriotic Retirement Plan:
There are about 10 million people over 50 in the work force.
Pay them £1 million each severance for early retirement with the following stipulations:
1) They MUST retire.
Ten million job openings - unemployment fixed
2) They MUST buy a new British car.
Ten million cars ordered - Car Industry fixed
3) They MUST either buy a house or pay off their mortgage -
Housing Crisis fixed
4) They MUST send their kids to school/college/university -
Crime rate fixed
5) They MUST buy £100 WORTH of alcohol/tobacco a week .....
And there's your money back in duty/tax etc
It can't get any easier than that!
P.S. If more money is needed, have all members of parliament pay back their falsely claimed expenses and second home allowances
Just because other countries do something, doesn't mean it's a good idea and we should do it too. Other countries' pension systems cost far more than ours does, and still they have a higher level of old-age poverty. The New Zealand model is widely admired among pensions experts for its simplicity and effectiveness; and it's worth noting that the UK is moving towards a universal flat rate entitlement.
I know you don't like the thought of giving public money to rich old people when there are poor children. But means testing has major downsides too.
It invariably and inevitably creates an incentive not to earn, not to save, and to pay clever people to find ways of getting round the means test rather than putting their talents to productive use.
That in turn creates a need for a complex and expensive bureaucratic monster to pry into people's personal circumstances and chase them around the loopholes - much like the complex and expensive bureaucratic monster that you'd need to administer a GST that was applied to some things and not to others.
This is exactly the way it works in Germany, where the concept of "retirement" first started as a ploy to wean the working class away from socialism.
Compulsory contributions by employee and employer to the equivalent of Super - in Ms B's case just under 10% of gross salary, matched by the employer.
Retirement age increased from 65 to 67, phased in over 20 years with people born in 1967 retiring at 67.
Early retirement possible with a deduction of 0.3% per month.
Dunne's idea isn't stupid - cost neutral and flexible.
And let's not lose sight of the fact that the original retirement age introduced by Bismarck in 1880 was 70, well above the life expectancy threshhold at the time, even when reduced to 65 in 1916.
"Dunne's idea isn't stupid - cost neutral and flexible."
Agreed - except that what is needed is not cost neutrality, it is cost reduction.
You could have a flexible system which enabled earlier or later retirement (and correspondingly lower or higher pensions) and reduced cost , if you were prepared to lower all NZS entitlements, not just those for people retiring before 65.
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