New Zealand First Leader Winston Peters has fired up at the Retirement Commissioner for saying NZ Super isn’t sustainable in its current form.
Diane Maxwell, in a Double Shot interview with interest.co.nz published on Wednesday, stressed the importance of laying the groundwork for policy change to make Super more sustainable.
She said that as our population ages, it’s inevitable that in time, we will have to increase the age of eligibility for Super, make it harder for migrants to qualify to receive Super, introduce means testing, and hike private contributions through the likes of KiwiSaver.
Peters has since released a statement saying Maxwell is “demonstrably wrong”.
Referencing Treasury’s 2013 Affording Our Future statement, he says NZ Super is still expected to be under 8% of nominal GDP by 2060.
It’s currently worth just under 5% of nominal GDP. An individual on Super receives around $380 a week after tax.
“NZ Super is not lavish and it is taxable,” Peters says.
“By international standards the cost of public pension provision in New Zealand is modest. Most OECD countries have public pension costs that, as a percentage of public expenditure and GDP, are above New Zealand.”
New Zealand currently spends around $12 billion a year on Super. Maxwell believes that if Super remains in its current form, in 20 years’ time, it will cost taxpayers $40 billion a year.
Peters claims: “New Zealand First is the only party with a common sense and long term approach to ensuring NZ Super remains sustainable.
“When it was introduced to Parliament, National voted down NZ First’s New Superannuation and Retirement Income (Pro Rata Entitlement) Amendment Bill 2015.
“This Bill was designed to address long-term pension affordability and the unfairness of the current system which gives certain elderly arrivals to New Zealand an exceptionally generous NZ Super entitlement.
“Tens of thousands of elderly migrants have gained access to NZ Super when they have contributed nothing towards it.
“On taking office National stopped paying into the NZ Super Fund (the Cullen Fund). As a result, NZ has lost out in billions as stock markets have surged in the low interest rate environment of recent years.
“The Cullen Fund is designed to prepare for and offset the pension costs of the ageing population. But National has taken no interest in the sustainability of NZ Super over the long term.
“NZ Super is sustainable. What is not sustainable is almost net 70,000 new immigrants a year; What is not sustainable is allowing foreign multinational corporations to indulge in widespread tax avoidance; What is not sustainable is the wholesale selling of New Zealand land, housing and businesses into foreign ownership.”
90 Comments
as usual WP is on the money, yes if you don't contribute for x amount of years or x amount of dollars why should you be entitled to super forever once you go past the age.
second so right on the super fund, it would have been double by now, and the tax gained from the new investments would have more than paid for the interest on the borrowings and been able to pay principal back.
but what else do you expect from these financial dinosaurs in power now
Actually those immigrants are displacing the local population from growing. Who wants to have kids when you can't even afford a house and both parents must work to keep afloat? They're also low skilled and just see NZ as their escape plan. What kind of high skilled person wants to come to NZ where the cost of living is expensive relative to income.
I know several which have come in the past year. It isn't all about money for them. It is the lifestyle they can have. Why does anyone what to live here? Highly skilled people can get paid very well here. You aren't going to starve on $160-$200k a year and you could buy a house if you wanted one.
"if you don't contribute for x amount of years or x amount of dollars why should you be entitled to super"
We should be careful about linking entitlement to Super to the amount of tax a person has paid or the length of time they've worked. That would mean that people who've been well paid throughout their working lives and therefore should now be quite rich, would get the most Super - whereas those who haven't paid much tax because they've been unemployed, or out of the workforce raising a family, would get less. Is that really what we want?
It also "sounds fair" that those who need more, get more, and those who don't need it, shouldn't get it. You cannot have both.
The flat rate NZS system balances these competing definitions of fairness, by avoiding the two corresponding definitions of unfairness - rich people getting more money than poor people, and feckless, work-shy people getting more money than hard-working conscientious savers.
In any case, there is already a system under which those who contribute more, get more - KiwiSaver. And indeed the market, which offers numerous ways of saving and investing money, all of which will tend to deliver more at the end, the more you put in.
NZS is a different instrument with a different purpose complementary to that.
Short memory. We were facing what we thought was impending financial armageddon then. Some individuals (including this one) plunged in counter cyclical but contrary to your assertion that the govt was the only one to not spot the opportunity, most individuals ran for the hills or hunkered down till the storm passed. Would have been a ballsy move for the govt to apply cash to fresh investment rather than debt repayment, at that scary time.
if you were still heading for the hills in 2009 more fool you. there were plenty of people who took the opportunities, including our superfund and many big time investors, and many many became richer during that period as WB says
be Fearful When Others Are Greedy and Greedy When Others fearful.
albeit I was a tad conservative but made enough for house with no debt and a passive income.
for me too many were locked into house investing as the only game in town and could not see what other opportunities there were
I did a heavy buying plunge in March 2009 and still remember the cold sweat awakenings in the middle of the night in the following months. Memories of travelling in the UK the year before when northern rock went belly up and seeing the queues outside their branches, were still fresh in my mind. Your comment on the perception that housing is the only game in town is still true but I'm starting to get the impression the penny might be slowly dropping and our sordid little secret about equities might be coming out.
from a personal point of view hope not,
can not see it as most kiwis do not understand equities or bonds, how they work or what to look for.
most understand how to borrow and buy a house which does not take much research or knowledge and there are plenty of people to lead them along the merry path especially on upswings, funny how those people disappear on a down swing
middleman,
You are absolutely right. It's amazing just how many people have 20/20 vision when looking in the rear view mirror.
Peters is,like all politicians,an opportunist,just better at it than most. Unfortunately, it's not him or Key who will bear the cost many years down the road, when it turns out that we should have tweaked Super when we had time to plan properly. Other countries are raising the age of entitlement and we will have to follow in due course.
What diversification, the global central bank put is underpinning the reach for yield in all asset classes?
Better to receive the 4.5% coupons out to 2027 than pay them away to foreigners when the 10 year NZGS yield is ~2.16%.
True, but not really relevant to the point that the super fund investing heavily in local debt would unduly expose the country to NZ inc specific reverses relative to the rest of the world. As it has turned out, that hasn't happened, quite the reverse as you observe. But the risk perception back then was quite different to now.
We really do have to question the affordability of existing " included " super recipients. Seems way too generous. How many realise that as long as you have no assets your partner can receive full NZ super irrespective of age ?
So we have the crazy situation where you can pop off and grab a pretty young foreigner who has never paid a cent in taxes who is then immediately eligible for full NZ super.
Cuckoo Land !
Winnie the Pooh is right on the button on this one !
Are you saying one can just stash their wealth in a trust and pick up a bride, get them a resident visa and then then they both get "$591.94 EACH after tax per fortnight". http://www.workandincome.govt.nz/eligibility/seniors/superannuation/pay…
Meanwhile every cent of extra income I work hard for is taxed at 33%. The ironically named National Party are a bunch of traitors.
With you Mr Winston Peter. Mr Denial PM another problem created by inmigrant.
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My vote for Mr Winston Peter for having the guts to speak truth without being afraid of so called secular political parties
Well said Winston.
Why don't you organise a few petitions for citizen initiated referenda on some of these points that can be dealt with this way. Many, notably immigration, of these have never been election issues so the successive governments have introduced them without any mandate. Help give the people a voice. I am sure that it would help your election chances.
Exactly (if i have your angle right?).. the idea they we can print infinite debt claims to pay for whatever is ludicrous .If they actually realised they are printing energy claims they might come round.
Super is not in the slightest way now affordable. We are all collectively bankrupt - the debt claims over future outputs just don't stack up - the resources and energy don't exist. ...
Don't get caught in this "how will we pay for this' junk. Unless NZ Inc's income is going to decline massively then its just about how you cut up the pie and how much you value the welfare of your elderly community and what share of the pie they get . Even if the pie was to shrink, are you going to put oldies on iceflows and tell them that they have enjoyed good lives and that it's time for them to move off for the benefit of the rest of society????
Well it has to be considered when you see tens of thousands of Kiwi youth still moving overseas for jobs & birth rates are still below replacement level. So immigration is the only way to replace those local Kiwis who are retiring.
Future demographics will be important on how NZ pensions are going to be sustainable. Future generations won't be able to retire & go onto a Government pension as baby boomers can now.
I think the NZ Government in the end won't have any other choice but to raise the retirement age to 67.
Maybe kiwis wouldn't move overseas and would have more kids if they weren't priced out of their city by the flood of low quality migrants National are using to pump GDP figures.
I would certainly love to come home. But it is simply not economically viable due the low salaries and extortionate living costs caused the migration policy being run by National.
Why not follow Wnston's lead and discuss the economic policies that has led those Kiwis to need to go over seas to find or get good careers? Moaning about the status quo is not constructive. Talk a bout solutions, if the discussion gets loud enough politicians will hear, if enough people are talking and aware they'll feel the need to act.
Part of the problem with a lot of the discussions on this site is that too many simply bemoan the status quo, with out discussing solutions. here are plenty of experts (I use that term advisedly) who get buried in technicalities about what is causing the issues, and I admit i have learnt a lot from them, but those conversations seldom go to solutions. Political movements start with public discussions, common people! the journalists on this site clearly enjoy the debates they stimulate, but let's use the opportunity to learn and progress, not stagnate.
The solutions have been discussed to death. I'd be happy to write a lengthy piece about why New Zealand is a dead end for most talented young people. But most people don't want to listen they want to argue to the death about how you are 100% wrong.
I think its a manifestation of the old kiwi inferiority complex, you are brainwashed from birth to believe that its the best place in the world and anybody who dares to suggest anything to the contrary is to be pilloried.
Anyway. The only solution that's going to even start to change anything is getting rid of John Key. His vision for New Zealand is toxic.
Cool, imagine the wealth we would have with a shrinking population. It would require different strategies to get rich, buying up lots of realestate wouldn't work.
Less taxes though, because you wouldn't need to build lots of infrastructure. The wealth recipe would probably be more representative of work done. Land and house prices would go down, not up.
I aren't sure why people are so afraid of deflation. Extreme wealth would stabilize. the working class people would be the winners for a change.
The population growth recipe is not sustainable. It can only end badly. Collapse of the environment, starvation, health pandemic or war. Or more likely a combination.
Roll on a shrinking population with negative inflation, the rich will get poorer and the working man will be richer.
Super is affordable it is just that they do not want the rich and the corporations to pay taxes
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Not just your vote - make sure that your elderly relatives are up to speed with the damage JK and his crazy immigration and housing Ponzi is doing to NZ. My folks think he is doing a great job but when you ask what he has done they go blank and fall back on the fact that house prices have gone up - no mention of how almost impossible it is for FHBs, no mention of the rise in govt debt from a well managed Labour value of 10 bn in 2008 to over a 100bn now, no idea about the chaos on the roads, hospitals, schools, crime, no idea about the rorts in "student" immigration, no idea about the pollution in NZ rivers from rampant development that makes most unable to be swam in or used for drinking.
'At the end of the day" what has he done except present an agreeable face to NZ media - should we be expecting more of our leader and indeed more of our sycophantic media?
Am I correct in saying that WP believes superannuation can be paid from the current account, rather than from savings (which the government doesn't have). In a descending interest rate environment there would have to be a good case for this. Sooner or later assets will have to reconcile with these rates, so it will ultimately be cheaper to fund it from current earnings, rather than pay the cost of negative rates or rely on other speculative plays that don't look to end well.
WP is quite right to question the continued importation of future liabilities.
Yes, it's paid from current account (ignoring the seperate NZ super fund which will be drawn down on in future years). I assume your 'importation of future liabilities' euphemism refers to immigrants. Peters makes a fair point here, especially about the older family reunification category migrants who currently get super after only 10 years here. This is far too generous. I think I read somewhere there are 50,000 in this category. And that's before you factor in their impact on medical care costs. I wonder what percentage of hospital surgery waiting lists comprise elderly family reunification migrants?
As I have said before Superannuation is only a book entry and a declining one at that. People die. Stop worrying about future liabilities in regards to super. If there is no super there certainly will be costs. New Zealand is a low income country and what are you going to do when you abolish/reduce super when the elderly are scavenging around rubbish bins for food. WP is right, it is affordable as it is. It costs very little compared to other countries where super is mean tested. A new government Department to assess all claims would be needed for one thing and what is means tested? In Ausstralia everything is means tested down to your furniture and paintings. Imagine the staff needed to assess all that.
False logic. Like saying a mortgage is not a liability because most of its payable in the future. Fine until banks start to get concerned about your ability to pay in the future. These book entries have to backed by something and that something is an increasing energy supply. When faith in the future value of money erodes you'll have problems.
The baby boomers to whom the current hysteria applies are a one off situation. I promise you they will all die. Then it will be back to normal unless of course we allow every Tom Dick and Harry and their elderly relatives come to New Zealand and become eligible for Super. But that is a political decision.
We also need to take into account the unintended consequences of tax cuts which handed super annuitants a windfall their income being tied to the average after tax wage.
We need to think carefully given the talk of future tax cuts as I am not sure we can give the oldies another windfall.
We also need to remember NS is means tested through the tax system. An individual living alone with no other income receives ~ 40 % more than someone on the marginal tax rate living together.
On balance what we have is probably as good as it gets and is the envy of many other countries - mainly because of it's simplicity.
Interestingly no one has discussed the ever expanding cost of accommodation supplements payable to retirees in rental accommodation.
Falling home ownership will have an impact down the line.
We should add future accommodation supplements to the projected costs of super.
What is interesting is how low the median wages are in nz for everyone especially new immigrants.
http://m.stats.govt.nz/Census/2013-census/profile-and-summary-reports/e…
Median income
For people aged 15 years and over identifying with the Chinese ethnic group and living in New Zealand on 5 March 2013:The median income (half received less and half received more income) was $16,000, up from $10,500 in 2006.
Those born in New Zealand had a median income of $18,600, compared with $15,700 for those born overseas.
For Indians the median wages is higher at 27k
For NZ Europeans the median is also low at 30k
Puts into context exactly how high the house prices are. Not sure who is going to be paying the tax.
So average auckland home is 30 times nz European median wage or 60 times Chinnese nz median wage. Crazy
Speaking of looming demographic catastrophes, what about China's? That's one that'll have much more global influence than anybody elses. With that combo of years of one-child policy plus sex-selection and/or infanticide of girls, they could have a far more extreme looming demographic disaster than anyone, and it won't be helped by emigration of working-age people out of the country. What's the plan of the governing regime? Is there a plan?
I'm all for reducing populations. But it's odd - there's all this hand-wringing over aging populations in Japan, and the west, and general economic and political freaking out over OMG how are we going to cope with less demand for space and resources, end of the world, end of the world, if perpetual growth ends we'll all fall off the edge of the earth and be eaten by dragons. Whereas China for a couple of decades had a full-on policy to try and reduce the future population by lowering the birthrate, and the sex selection aspect of the culture further depresses the birthrate for the generations of only children, because there's a surplus of men. If an ageing population is such a big deal, China is the place that should be panicking. But they're not, and they're not doing anything much to prevent emigration of younger generation. It's interesting, and I really wonder what the underlying policies and thinking are.
Yeah but, what China did to compensate for reducing population is use the rest of the world, by hoovering up all the manufacturing, thus negating the need for growth within its own country in the form of growing population. The rest of the world provided growth for them, but that can't carry on forever. So we still have some thinking to do about this all works, but work it out, we must. We have to figure out how we prosper without growth, which, bottom line, always means increasing numbers of people. I would prefer we stopped taking the easy option on this, which is blow each to bits for a while, till we reach sufficiently reduced numbers that we can restart the whole stupid process again.
@ Kakapo. It's good to hear that you are for reducing populations. As for me I can't see what the issue is about having a stable population. Seems a great advantage to a nation to have that.
As for China, they have wisely changed their demographic future. So thats a low stress situation and 'they don't have much to manage.
Stable with a gradual ratcheting downwards is what I'd see as best. Do it the easy way rather than the genocidal way. The insistence that population growth is a good thing and essential for prosperity would appear to me to be largely based on concentrating on money but ignoring the real resources that money is a proxy for. When you look at real resources, like arable land, potable water, and ocean fish, it's no wonder that half the world's geopolitical, ethnic and religious blocs are at each other like weasels in a sack.
If, as I suspect, all the named parties here are immigrants, I wonder what skills shortage they filled?
http://www.stuff.co.nz/business/83271758/property-developer-slammed-in-…
Saw one the other day about a dude who was deported to India after being convicted of raping a 14-year-old, was allowed to return because apparently India was too tough for him (oh diddums, should have thought about that before committing a serious sexual offence against a child), and is now back and getting into property development. Just the type of person you want as a landlord with keys to the property. Why is there no vetting for this industry, to at least keep the serious criminals and sexos out?
It was in the paper a week or so ago, I'll have to see if I can track down the link. He was deported, so presumably PR or other visa status, not citizen, and from memory had left India as a kid. Was sent back to live with relatives in India, but it was tough going for the poor blossom, got sick, wasn't what he was used to, and was able to appeal for return and is now apparently enrolled in building course and going into property development.
http://www.stuff.co.nz/national/83043792/man-who-raped-teen-girl-will-n…
Bit of an odd one in that he was a minor when he committed the offence, and it was covered up for a while and reported later. But he was convicted and sentenced, and appealed deportation. Some numb-nuts at Immigration fell for the sob-story and let him stay. Notable lack of regard for the victim in all this.
Cant keep a good man down
Same person - different scam - Now an Auckland property developer - they keep on keeping on
An Auckland businessman, who says he made $500 a week "tax-free spending money" from gambling at Sky City as well as free accommodation and a car park, has launched defamation action against an award-winning journalist and is blaming her for his casino benefits being cut off.
Augustine Lau, who used to work for real estate firm Ray White, has launched legal proceedings against Metro publisher ACP Media and its editor-at-large Donna Chisholm.
These followed the publication of a story in Metro last November which alleged Lau engineered a complex system to make money for him and Asian property investors.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=108…
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