Don’t means-test our superannuation.
A new study has found widespread opposition to financial barriers for receiving superannuation, and that support for keeping the retirement age at 65 has increased.
The University of Otago study surveyed almost 1300 people in 2022. They were asked questions to dig into how they felt about New Zealand super including the age of eligibility, means-testing, and the willingness to increase both current and future taxes to pay for the pension.
The Otago study found that almost a quarter of people ranked keeping the age of eligibility at 65 as the most important aspect of NZ Super compared to almost a fifth of people in the 2014 survey.
Raising the retirement age to 67 was ranked by 61% of those surveyed as the “worst policy”.
The survey found that respondents expressed a strong preference for universal superannuation rather than one given out on financial need, and those surveyed also opposed policies that would result in “steep increases in taxes on future generations”.
Study lead author, Andrew Coleman, said there was a willingness amongst people of all ages to support initiatives such as the NZ Superannuation Fund that reduce the costs of superannuation on future generations.
"The findings showed a greater opposition to increases in current taxes than in 2014. Despite this reduced support, a majority of the respondents still would support higher current taxes to reduce the size of future tax increases, given plausible investment returns."
The 2022 survey also showed more people were feeling less confident they’ll have a comfortable retirement compared with the 2014 survey.
Pensioners take the lion’s share of welfare payments made in New Zealand, with about 880,000 people receiving NZ Super out of about 1.4 million people who get government assistance including students.
The bill for NZ super is expected to rise, with the Treasury predicting in December that benefit expenses would rise $3 billion in the current year mostly driven by NZ super payments – with costs for super predicted to increase by $1.8 billion because benefits are indexed to increases in the average wage.
The Government decided to increase benefits by the rate of inflation on April 1, which added an additional $311 million in spending on superannuation.
Overall, benefit expenses are forecast to increase by $9 billion by 2027, again driven by New Zealand Superannuation and New Zealand Superannuation is projected to grow from 5% of GDP now to 7.7% of GDP by 2061.
Retirement Commissioner Jane Wrightson said the survey supports the 2022 Review of Retirement Income Policies' key finding that the age of super eligibility stay at 65.
She said 40% of people aged 65 and over had "virtually no other income" besides superannuation.
"To provide good retirement outcomes we need to maintain NZ super at current settings and explore other mechanisms to support those where this is not enough on its own."
206 Comments
Raising taxes now doesn't equal inflation if the money isn't spent until later there are a lot more people on Super.
It would actually lower inflation as we would have less means to spend now.
I'm for the increase to 67 and minimal tax raises mind you. If your body isn't up to working at 65 you can still get a sickness benefit any way.
Might be less but not the end of the world.
The only rational course is to keep NZ Superannuation universally available at 65, but to restore a form of the surtax or surcharge abolished in 1998, to discourage those who do not need NZ Super from applying for it. Susan St John and Claire Dale have shown the way.
https://cdn.auckland.ac.nz/assets/business/about/our-research/research-…
https://cdn.auckland.ac.nz/assets/business/about/our-research/research-…
Rubbish. Raise taxes when people are already struggling to survive on the money they earn? Why don't you just say you want every one to live in poverty! Make sure that applies to yourself too, or are you so special it won't apply to you. Don't forget the politicians who will do that to the people will make sure they're OK first.
Plus take a close look at history. Why do you think politicians can be trusted with increased income from raised taxes to be ring fenced for pensions? Write a law to stop it? Piggy Muldoon rewrote a law that did that to steal the GSF from the people and make it available for the politicians to squander. This is just a bullshit call from people who will choose to ignore history, and not learn it's lessons.
ECONOMICS 101
Eg - Jo blow builder gets taxed more... he then maintains his margins/profits/staff/ lifestyle by doing what...
A. Putting up prices
B. Going bust.
SAME APPLIES TO EVERY BUSINESS!
Jo Worker gets a tax increase while joe unenployed gets a dole increase.. now thats fair,!?!?
Hard working maori fella has a life expectancy of 60? Tell me how taxing him more so he has to subsidize a healthy white guy in his retirement is fair?
Muppet!
Option B does not have to happen if option A is not doable. What if Jo Blow has absolutely creamed it over the past few years. Do you think he's going to just fold because tax has gone up and he can't increase his prices? Will Jo Blow drop his prices if taxes reduce?
I wager that 99% of people who think the retirement age should increase is either under 50 or doesn't do physical work. You will be surprised how quickly your body fails after 50, and especially after 60.
People working past 65, good on them. They are paying tax towards their own super entitlement.
That is 6.5% of GDP not of tax revenue. Tax is 30% of GDP, so super would be 22% of all tax paid (at current rates). And then there are the health care costs and rest homes too. Quite conceivable that 50% of the tax a young person earns will go towards supporting the retired.
It depends what job you do. I know plenty of people that have worked until 70 in office jobs. One was getting paid a high salary while also getting NZ super paid by the taxpayer and getting his bus fare into town paid for.
I think the age should be increased to 70 but you can go on it earlier if you can't work.
Its simply not feasible to live until 82 on average and only work for 40 odd years unless we pay crazy high taxes for those 40 years.
A real simple way would be to tax your job after you turn 65 at secondary tax levels rather than the reverse. Most retirees working get the super taxed at secondary tax, that would make them retire sooner than later. more tax to help pay for super, and free up jobs.
You realise there's a tax wash-up at the end of the tax year, right? Whether or not you've been paying the secondary tax rate makes no difference to your annual tax liability - it just influences whether you have a tax refund or more tax to pay at the end of the tax year.
QF
Your comment suggest that you don’t really understand taxation.
It really doesn’t mater one iota whether one’s superannuation or employment is taxed at secondary rates. At the end of the year, income from all sources are combined and then taxed as total income.
As an aside, you need to appreciate that it is common for those who pay secondary tax on one of their incomes to receive a tax refund.
Secondary tax is applied simply as an interim tax rate . . . and it is possible to apply for a special tax code which reflects the likely total tax.
If eligibility of Superannuation is enough to entice someone out of a job, then it's questionable the best person is in the role. Maybe they were at one point in time, but not today. We have a couple in our company, been with the business 20+ years but now they've hit 65 they're skimming along doing less than the bare minimum. We actually duplicated their roles as a sort of "succession plan" for a couple of younger but hard working members in our team that were otherwise going to quit.
NZ has high workforce participation rates, especially among the older cohort. Bring in pension means testing and droves of Colins and Maureen's would hand in their Bunnings uniforms and head to the beach with serious consequences in an already constrained labour supply environment. In our main family business we highly value the skills, knowledge and steadying hands of our over 65's.
For Christ sake!? ... if you left NZ to the young dummies we'd all be rooted.
Just look at the young white, overindulged, rabid, loudmouth, mainly brunette, self entiltled, woke, mainly female, activists that turn up to grèen/ gay/ anything protests now... with thier iphones and plactic clothes!
Give me a wise head over young mind all day long.
I know the truth hurts Rick. But im happy with my understanding and use of the word Rabid..
Im also happy with my "on point" comment that you may " wokely" be against
Maybe? You need to go back to school... oh wait a minute...
Rabid
ra·bid ˈra-bəd
also
1
a
: extremely violent : FURIOUS
b
: going to extreme lengths in expressing or pursuing a feeling, interest, or opinion
Lots of tradies I know left school earlier, didn't do 4 years of further education and went straight into full time work. The career paths tend to be more front loaded so theoretically they should be considering this and saving more for retirement earlier on.
Part of the equation when choosing to pursue further education is knowing the reality that your body won't be able to keep up as you get older and picking a career that you can keep doing longer to compensate. It's a complicated issue and I'm not sure what the correct answer is but why should workers who made a choice to go into a more front loaded career path that has an expiry date get more benefits than those who chose a career that they can keep doing for longer.
Female bodies tend to out last male bodies and especially for physical work. To achieve equity the age of entitlement for women should increase. Which just proves how stupid arguments based on equity instead of equality of opportunity are.
Most physical workers never benefitted from govt subsidised tertiary education and paid IRD taxes while the more academic went to university so they should be entitled to Super earlier. Make super entitlement age 45 years after starting work?
Interesting that no one ever mentions the stress related issues that impair people working in mid career let alone later in life. We have been sold this pitch that health continues to improved and life expectancy and quality of life is all upward, so push out the age and cut back the pension. I know for a fact people younger than me certainly will need a backstop. While the last of the the crop with state employment pensions, super plus QE fueled portfolios continue on their merry way…
Be interesting to see the breakdown of those responses by age: 25% of NZ's population are over 65.
I'm suspicious that a lot of the anti- responses were boomers & gen-X, who would be the first affected by the raise.
In fact, be interesting to see the age spread of their respondents. Guess I'll have to go find the study.
I’d be one of those affected but it should be raised to 67, given that on average every decade we live an extra 18 months and the country is so short of workers.
Physical workers may complain but there are plenty of other jobs available which are less taxing on the body as you age.
It should also be means tested. Quite scandalous that generation Me (boomers) failed to adequately fund their retirement on a personal savings or national level via taxation, voted for Muldoon who shut down the fledgling national super fund, and proceeded to implement user pays systems for successive generations whilst index linking their own benefits.
Done properly means testing is very very complex. Ok, simple for the person who has been on paye all life and has a house and a bit of local cash.
But throw in those with complex business affairs, companies, trusts and overseas investments and it is very time consuming. Remember, many of our citizens are now form overseas - many from countries of which we have no sharing agreements. How do you means test them?
So means test if you will. But you will need an army of accountants and lawyers - otherwise it will only get the little guy.
You didn't fail to fund your super Frank, you did this by the taxes you paid when working. This went to your elders and one day it'll be your turn. Pay as you go. It's an elegantly simple and affordable system. You can still make additional provision for old age if life deals you a decent hand. But yes, Muldoon struck the country a grievous blow by canning the Labour Govts contributory super scheme, our emaciated capital markets the principal victim.
My wife had cancer and I've had a heart attack. We reckon both of us would be dead if we had had the medical facilities of the 1990's.
Read about the progress being made with anti-aging - what happens with mice today is likely to happen to humans in the next decade. Much depends on whether the gene editing will be cheap and universal (effectively the 1st world -v- the 3rd world which has minimal medical facilities) or restricted to the wealthy - President Xi for life - a very long life.
No thanks, I'm more than content with death by 80. Hopefully voluntary euthanasia is legal by then and we can choose how we go with dignity without having potentially large financial and legal ramifications for those we love. All it takes is to see the pain caused by loved ones getting now ever increasing prevalence of Alzheimers and Dementia. Should this ever be me, I'd rather not be a drain to the health system and would much rather see myself off peacefully with the knowledge of my family being understanding and retaining the hard-earned wealth accrued across my lifetime. Put the money to someone young with a rare disease or something similar, who will continue to pay tax which helps others.
If you are referring to how my wife and I have extended life because of improved survival rates for cancer and heart problems then you have a point but we are happy at present - any dementia is fairly modest. However the scientists researching aging are not just letting old people live longer they are actually reversing the aging process. There is plenty of natural variation - as a member of U3A I meet decrepit people in their sixties and lively people in.
Relevant to NZ Super entitlement age should not be based on the date you were born plus a standard figure; it should be based on the date you are likely to die and subtract about 12 years - taxpayers could afford that.
Yes, good point and one of the reasons NZs cost of super is affordable - our relatively young population. At peak boomer pay as you go will still be affordable but after that bulge is over and if NZ suffers the same demographic decline and ageing population that is already underway elsewhere, there may need to be a rethink. Good reasons for KiwiSaver to receive continuing bi partisan political support.
Except the older generation was much smaller then, so the average boomer's taxes only had to fund super for about 2/3 of a person. Now they (understandably) expect a whole person's worth to be funded for them. Equally understandably, later generations are unhappy about funding that when they won't enjoy the same pay off themselves.
The missing part now is the reciprocity that was part of the social arrangement when the universal pension benefit was brought in. Back then, in exchange the older generations gave the younger generations debt-free entry to employment, and affordable housing through significant build efforts and policy.
Today....we've kept the universal pension benefit but have indebted following generations hugely through poor and selfish policy. Housing as a way to enrich ourselves at following generations' cost, and debt for entry to the workforce including to the benefit of private training businesses.
Frank funds his own super, he’s always been one for self-reliance.
The current cohort didn’t pay for themselves, and since forever voted to lower taxes but continue to keep the same benefits for their cohort. Call it the Little Red Hen generation.
As others have noted there was a far greater worker base for paying for the previous generation retirees, I believe 6 workers to 1 retiree, which has shrunk to 3-1 and will soon be 1-1. That’s unaffordable, especially as generations are living so much longer.
We also can’t keep dismissing things that occur overseas as too hard all the time. Kiwis need to shake this can’t do, too hard, too expensive, isolated island mentality.
Those cheapest 300 listings include houses for removal,plans. The next 300 or so are in West coast Waimate Gore etc. There are 50 listings in the hutt valley in that price range. Minus a couple due to being next door to gangs in Taita/Wainuiomata/Cannons creek leaves about 42 still. The asb bank calculator says I can borrow 420k with todays rates, RIP maybe next year.
For young people to get into the housing market, yes. Studies have incontrovertibly established that. But on balance 'easier'; no. Raising a family and paying a mortgage during the 80's and 90's while the world imploded around you as NZs economy was convulsed by restructuring and you never knew from one day to the other whether you'd have a job tomorrow, was hellish. Many friends and colleagues had their careers, hopes and in some cases lives, destroyed. None of us at that time knew inflation would demolish our mortgages and that better times lay ahead. I'd take the difficult housing challenges young people have today over what we went through during that period, any day.
Seems pretty anecdotal in comparison to the cold hard facts that necessities like housing today are significantly more expensive than they were in the past.
Everyones circumstances are different. Some people would of had it tougher than some have today. Some people today have it tougher than some did in the past. There is no point in comparing who had it worse, but it's pretty clear the housing situation today is a lot more difficult than it has been in the past which has a lot of wider social implications.
Don't forget banks used to actually have somewhat of morals back then, where you could have a relationship with a real person. Young people today are faced with a world full of ever-more systems trying to prey on them in every way, you simply cannot be as carefree as you used to, be it as a person, parent, customer, etc. We only have to look at the behaviour of the banks in the last 3 years to see what I mean.
You cannot ignore interest rates in assessing housing affordability.
Back of envelope just looking at interest costs:
Using my eg of $500k @10% deposit $450k x 6% = $27k pa interest which is 45% of the median income $61k
In 1978, a $30k house @ 10% deposit gives $27k x 15% = $4k pa interest which was 45% of the median income $9k
In 1978 a first mortgage was typically not more than 60-67% of the property value. My second mge & solicitors finance were also at higher interest rates than 15%.
Don't cherry pick the numbers, stick to the facts.
The median house price now is $762,000.
The median house in 1980 was $25,500
762,000 @ 10% Deposit is $685,800 x 6% = $41,148 which is around 68% of the median income at $61k
$25,500 @ 10% Deposit is $22,950x 15% = $3,442.5 which is around 38% of the median income at $9k
This actually made me feel sick to my stomach for FHB's. Situation today is worse than it ever has been.
Why do I need to use median household income. I am using the median individual income from 1980, that is still a direct comparison. This thread was talking about how the actual affordability of property is much worse than it seems partly because household income is used instead of individual.
Household income is hiding how previously an individual could quite easily get by on their own with a single salary. Definitely not the case today.
I get your point, but that basically means that what previously took 40 hours of work to achieve now require 80 hours of work. There were plenty of people working with two incomes back then as well, especially in the run up to purchasing a house where no kids were yet involved. So to be more realistic we would probably compare household income to household income between the two time periods, but I've had a look and it seems like they didn't record household incomes back then. In absence of this data I think its more reasonable to compare between datasets that we do actually have rather than assuming other factors that neither of us currently have the stats to back up.
And then if you are raising children you now have childcare costs on top of your other expenses reducing your ability to service a mortgage. And what about single people and single parents? Are they basically relegated to renting and being treated like second class citizens? You can see how these sky rocketing prices have had an effect on our birthrates if whats required is two incomes working full time to service a basic necessity like a roof over your head.
What's stopping me? Not overleveraging my entire worklife and family's wellbeing on an investment?
Good on you for getting that home. I'm not prepared to take out a 10-20x leverage loan for a property when the housing market is on a decline + govt is in talks about raising taxes :)
A massive 50% of over 65's reply entirely on NZ super for their support, another 20% have a little capital for a rainy day, then there is then a modest group left who are 'comfortable'. The number with enough capital to survive independently of NZ super is quite low. Means testing would make only a small difference to overall cost, after the extra administration required.
Agreed, we need to pick a date and then get on with it basically. A bit like you won't be able to buy cigarettes if born after a certain date.
I'm in my early 30s, and would happily trade my future super entitlement if I could instead have a more generous Kiwisaver scheme. As I'm self-employed I don't currently contribute all that much as I see no benefit in paying in more than the bare minimum to get the government contribution, instead investing elsewhere with the added bonus of having some ability to withdraw if needed.
For example, perhaps people my age who have the best part of our working lives left could opt for the ability to contribute as employee contributions up to a certain $ value per year from pre-tax income, making saving via Kiwisaver a more compelling proposition (I can picture Robbo recoiling in horror at the thought of anything involving taking less tax, like a vampire at the sight of garlic). E.g. if I could put $10k a year into Kiwisaver from pre-tax income on the proviso that it is locked away until retirement age, it changes the dynamic from my perspective.
I appreciate not everybody is in the position to save, so maybe having an age band like those who are currently 25-35 where you can opt in to this alternative scheme would be a way to start the process, before making it mandatory over time.
I sort of agree with this, but there's nothing to say Kiwisaver won't be tanked to zero by global economic turmoil or disbanded by a future parliament - at this point what options do you have? Making the pension contingent on the state gives you significant political leverage as a cohort as we've found out, and have been on the receiving end of that as a younger worker, I'd need a good reason to give that up in the future, along with the dead-certainty of receiving something in your retirement.
Good thinking dumbthoughts. Couple of things. Compulsory Kiwisaver works to protect others from the careless.So.
!. I would be be happy for your contributions to no longer be compulsory once you reached certain thresholds. Eg. Million dollar balance at age 50.
2. I see no reason at all for a compulsory scheme to be taxed at all. Why. At entry, during and drawdown. It has not been a significant tax source up until now, so when it gets big taxfree does not hurt the government.
That it is impossible to save for retirement using KiwiSaver. Long term average growth for stocks is around 8%. However this doesn’t factor in taxes paid on way through, or inflation (costs of living). I looked at the stats wage figures, if you use the same assumption on income growth as you are using for stocks you may be able to save for a few years but not allot. That is not factoring in black swans either. Remember that in 20 years 80k could be the minimum wage…
Super should be income tested without a doubt, however not asset tested. It’s the social construct of younger people paying for older people that has to stay. That in itself is inflation proof for example I earn more now in dollars than my parents did. The government need to reduce spending, and Iwis, religious groups etc need to be paying their fair share. I would be inclined to keep benefits but make tertiary education free as this boosts productivity (hopefully) but only for courses that provide proper skills, not a masters in pigmie lesbian trans arts etc etc. Super funds should be taxed either as you contribute, or as you withdraw the money….and remove the tax on employer contribution. More flexibility on how you invest would also be good. Fund managers clip the ticket on the way up and on the way down. Get rid of ESG while we are at it. Solved now onto the Ukraine…..
I think as a society we can't save for retirement by having a bunch of numbers in a bank account or on paper. In the end of the day we need to have a workforce that is capable of supporting the non working population. Since the percentage of old people is increasing we need to become more efficient, Speculation on assets like shares or houses will not accomplish this. What we need to do is improve education, and not nonsense but education on things that actually do necessary things, we seem to be falling back in that area. We need to improve our infrastructure so we can get things done more efficiently. Also we can have people work longer, you can still pay for their pension but encourage them to keep working.
Saving for your retirement only works for individuals, if I can out save the person next to me I will be better off. We could out save the rest of the world but I doubt it, and to me that would still be unethical.
Agree it will end up less than you expect, especially taking in to account inflation.
The raw numbers might add up, but your purchasing power will be a lot less.
1mill now will buy a lot less than 1 mill in 30+ years, and you add living for another 20-25 years worth of inflation
Way easier to pay for "your" parents retirement when its 6 workers for every retiree compared to 2 workers for every retiree (direction we are headed in). Immigration just kicks the can down the road.
We can either change retirement age/means test, leave it as is and watch it break, or change how revenue is gathered so the burden isn't entirely on workers incomes.
You forget that the bigger families that provided the higher ratio back then also meant a correspondingly smaller inheritance per child. And high death duties as well.
Now the average child will inherit a much bigger sum, and tax free too.
I would be in favour of bringing back death duties to help fund the rising super cost. Give back to society a good chunk of what it gave you in life.
You forget that the bigger families that provided the higher ratio back then also meant a correspondingly smaller inheritance per child
Anecdotal, but for my Family this hasn't been the case and I imagine it isn't a unique situation.
My grandfather suffered a stroke when he was 67. He then had to go into a care home for around 15 years before he died. This basically cost my grandmother everything and she is now primarily supported by my parents who have spent a fortune making sure she is cared for. If a family is unfortunate enough to have this happen to them you can quickly see that inheritance fade away especially if the house has been sold to move into a retirement home which has care facilities.
A smaller amount of children also works in reverse, there aren't as many kids to share the load of caring for an elderly parent. So that inheritance can go down to nothing and then reverse if the kids need to financially support their aging parents.
Life can throw some pretty awful stuff at you sometimes and all the financial planning in the world can be undone by an unfortunate set of circumstances.
I wonder if you could do a half way measure regarding asset testing super. Ie so the wealthy still received up to 50%
its a strange one as the wealthy have pre person contributed more to the super, but also have the least need. A half way measure seems like an ok outcome.
Don’t confuse wealth with tax. Many of the wealthy are so from riding an enormous property boom and their wealth is derived from enormous tax free gains.
So means testing makes sense. They can always sell a property if they have too much and once below the line receive the retirement benefit
Good point.
time for a tax free allowance of 25k nzd PA.
There should also be sharing of allowances such that one income families are in same position as two income families.
Right now we have bizzare situation where a persons income is treated as family income for benefit assessments, but theirs and theirs alone for tax reasons.
Once the Nats role back the tax rinsing rules, those that can will buy more real estate to avoid paying tax for old people will do just that. Thus continuing the widening of the have vs have not and further punishing those that cannot afford rental properties. First step is means testing including all assets in trusts, then look at further steps.
The universal land tax makes more and more sense every day. A catch all land owners especially the specuvestor tax rinser.
We already have higher taxes.
The tax rates quoted in 2014 were already overdue to be revised in light of inflation. Now it is screaming away and we still have the same tax rates.
Maybe we should wind back super increases until we have inflation under control. A lot of workers are having to make do with less than the CPI, and they're actually putting in 40/50 or more hours a week.
In essence the survey showed that:
1) we don't want to work longer (past 65)
2) we don't want to pay more taxes
3) but we do want to receive more money at retirement age
The way to do it? Tax others and/or don't give others a pension (means testing), give it to me!
Haha, we're doomed (well those who haven't saved for their retirement are doomed)
Yeah these surveys are so pointless. To sum it up:
- Do you want the government to give you free money: yes because I've earned it
- Do you want the government to give other people free money: no those lazy bludgers
- Do you want the government to tax you to pay for it: no just cut some other govt spending that doesn't affect me
Correct. Less or no McDonalds, Booze, new clothes vs old, newer car vs older car, scooter vs push bike, holidays,concerts, movies, Netflix etc, etc etc. All things I rationed minus cigerettes which are kind of like a pension fixer - perhaps thats an idea = we make smoking cheaper and compulsary.
Note Florida is the first state in the US to make financial literacy part of schooling - https://www.floridapoliticalreview.com/florida-requires-financial-liter…
Has Florida got the right idea?
And yes tax rates should be indexed - but that would mean the government not being able to tax by stealth
"but that would mean the government not being able to tax by stealth" - it would mean less tax for government and some kind of cuts. At some stage they would have to cut the big ticket items: super, health or welfare. We wouldn't feel much wealthier from the lower tax brackets, just like the Americans that are much richer than us all claim to be poor, but in addition we would have shit super, health and welfare.
No one who is going to be made marginal by a bump in the minimum Kiwisaver contributions is tossing up between a new or old car. They're deferring maintenance just long enough to get to their next WOF or forgoing insurance to make it happen.
Pulling an extra 3% of income out of working Kiwis pockets is only fair if there is a similar reduction in tax rates on wages. It's unfair that they fund their own retirement by force and also underwrite someone else's. Otherwise what you're arguing for is basically just a tax increase.
Yeah the poorest should get something - like redirect the government contribution to them - makes no sense I get it. In Aussie you can still get Super if your savings are not enough. But if you want more than the basic you save and make sacrafices, if you dont save you dont get. There are no fairies at the bottom of the garden
So workers get the privilege of paying for their own retirement out of pocket whilst still having to fund superannuation for older generation. Bit of a raw deal. Land value tax to shift the burden off workers and onto capital so people with assets can fund their own superannuation without crushing a generation of workers under the demographic hump.
I am over 65 and I would propose the following:
1. Asset test Super, BUT it cannot reduce more than 50%
2. Increase the age to 66 for people now 30-50 and increase age for those now under 30 to 67
I have no idea how much it would save, but I assume quite a bit.
I would be glad to lose 50% (wouldn't change my standard of living at all) to help the greater good.
I would be glad to lose 100%, but think the 50% threshold would have a better chance of passing.
I think this is a good middle ground, but I'd also suggest it's super urgent we sort out the tax treatment of Kiwisaver; it needs to be switched to a taxed-on-exit system ahead of any other retirement changes. The other stuff that takes years of consensus building can happen at almost any point, but we're missing out on a key reason why other super schemes are so much more attractive than our own.
Talking about superannuation, implicit in this is about quality of retirement and that's not only about money.
I have a bug bear that we far, far too often only consider the financial aspect - the Retirement Commission is an example - and the wider aspects are neglected.
I've now been retired eight years; I learnt about retirement from my father's mistakes and I have closely observed my mates.
When one is thinking about the financial side of retirement it is equally important to consider the wider aspects.
My ranked list of the most important factors for retirement are:
1. Your health - without it everything else is secondary. There is a need to keep fit; a lack of activity and obesity will severely handicap you - forget international travel and outdoor activities well before 70
2. A partner - on your own one tends to internalise things and becomes bitter and twisted (aka "grumpy old man" syndrome)
3. Genuine interests - especially those that keep the brain active (the jury is still out on the causes of dementia but a non-active brain is right up there)
4. Good mates - a weekly coffee morning and a Friday night beer is a highlight and not expensive
and only finally.
5. Money - I know of a number of people who live an enjoyable lifestyle off the pension ($380 pp pw) only, but a mortgage free home (a small one which doesn't have to be the flashest house in the street helps considerably).
Workhouses for the poor retired peeps could be an incentive for youngsters to put more away in advance. Manual labour.. a bed and gruel.
The kids will probably vote for that anyway when they grow up and want to spend their money on fixing the environment and infrastructure that we messed up (rather than paying us to lounge around in homes with expensive healthcare)
I'm just going to point out that this is already a very high tax economy, exactly how much more taxation can workers be expected to yield?
https://data.worldbank.org/share/widget?indicators=GC.TAX.TOTL.GD.ZS&lo…
How about just NO.
Labour raised taxes from 33 to 39% so we could get good healthcare, in the Clark government. What did we get....nothing.
Labour implemented KiwiSaver to solve this problem. Will it solve it.....NO.because there are far too many loopholes to getting the money back out, the fees are far too high and there are not really any incentives for putting money into KiwiSaver. Tax free contributions would make it a roaring success, will they do this, NO.
Do we save already for super through our taxes, YES we do.
Do I save for my super by myself, yes, since I was 20, I am now mid-40s and could retire now if I wanted to.
Should I now have to pay again to retire through higher taxes for something I am already entitled to. NO.
NZ Super will be pocket money for me when I eventually do retire and that is the way it should be.
People need to start taking responsibility for their own financial situation and stop relying on others paying higher taxes to counter their own incompetent financial planning.
Your one size fits all approach is pathetic, and I am going to call you out on it as a matter of principal. If people like you were in power we'd have only the social elites having an acceptable standard of living and the rest of us on the streets or slums.
People taking accountability for their life choices is one thing, but do not confuse this with the majority who actually don't have a choice in who will employ us, how much will we get paid vs minimum expenses and then lastly savings.
Many are not lucky in life like you Jeremy, nor did we have the same opportunities and privileges. I personally strive for better income, go for promotions, but at each turn there is a other cost or fiscsl pressure that's outside my control.
I am really annoyed at your self entitled opinion, wake up times have changed. It's not the 90's anymore.
You know absolutely nothing bout my circumstances, so please feel free to be as annoyed as you like.
All I know is that I went to school (not a private one), I went to University (which I paid for with a loan), I listened in both places, especially to the compound interest bit.
I then started saving when I was 20, at about 50% of my $1000 per month income.
Thats all. Time and interest takes care of the rest. It is not rocket science.
So, I don't really care if you are offended by that, or my ability to listen and do what everyone should be doing.
I object that it is even suggested that taxes are raised to pay for something that is already being paid for out of general taxation, as that means I effectively would have to pay three times as a result of the disorganization of others and the incompetence of the government in managing our taxation.
The reality is that the situation can be sheeted home to the government in the education space, as it is the education system that turns out generally twits with no financial knowledge that then never progress in life and are left to rely on handouts from the government, collected through taxes from the hard work of others that actually made an effort regardless of the poor quality of education provided. I was actually pretty lucky, as in my day (which was not that long ago), schools actually taught people stuff. The basic message from the school I attended was unless you a) Graduate from high school, b) Attend university, and c) implement good financial management, then there is a good chance you will end up in a great big mess 30-40 years in the future and will lead a very uncomfortable life. Turns out they were completely right.
I would not count myself as lucky, all I have done is work extremely hard, and if you do that, you get the rewards. Most people don't. I can't change that and so nor should I pay for it and nor should any other hardworking person, particularly when it is already paid through general taxation.
25 years ago was 1998. My 'income' (student loan) was $150/week. My rent was $60/week. My food bill was ... $25/week for a small trolley of groceries + $1 for the peanut-butter memphis meltdown I bought as a treat. Went out to Subway once a week with friends for $4.
I had meat, rice, fish, potatoes, etc. I wasn't hungry.
I also bought $40 of CDs every week >< If only I'd saved it. If only I hadn't been a loner, and been able to join the big cooking group who spent $9 each, yes $9! to achieve better food living than I did because they could bulk buy, plus only had to cook twice a week each.
I could've easily saved 1/2 of $1000/month then, so I fully believe this story.
We could live on 100 bucks a week back then in a shared student-type flat, including food and utilitiies.No problems. Same as the cost it was during university. I think the starting salary was $13000. Lived about 1km from work so no transport costs. Today the starting salary for the same job is 50,000-70,000. So, much easier to get the same result today. A graduate would be getting pay of 3500 on 60k salary, and they would need to pay about 1200 per month for food and rent (a room). That would leave 2300 left over. Easy to save 1500 of that if you are determined for a few years and get investment started. By the age of 24 you would have 80k or so invested and be well on your way. All going well, with average returns that amount would double twice by the time you were 35 to 320K without further investment from the age of 24. By the time you are 35 you should be well into a house with lots of equity and a superfund returning you 32k a year without doing anything (based on 10% return comprising dividends and captial gains). Then keep on investing with your higher salary and soon you would have 500k super at 40 year of age. Even if you don't invest from that point onwards, that should double twice or three times before you retire, so you would end up with between 2 and 4 million and a freehold house. That is conservative planning. That is how I planned and I made the assumption that I would never receive bonuses or anything like that when I planned, so I have ended up better off than I planned. I didn't invest in property because I was not a huge fan of debt (except for own home), so it's all non-leveraged returns based on fixed interest and share market investing (mostly overseas). It is basic compounding interest at work.
You make valid points but I think the numbers are a bit off. Minimum wage 25 years ago was $14560/year so your starting salary should have been at least that much or more if you'd been to University. $100/week costs sounds like a push. In the late 90s even Christchurch had student rents of $50-$70/week then you'd have utilities, food and transport on top of that.
Numbers are correct. I started 1996, and I remember getting just over 1000 bucks after tax each month. I believe the tax rate was just over 10% for that income and I earned less than the student loan repayment threshold (which was 14000 per annum) so I did not have student loan payments (which I think were an additional 10-14% on top of tax) until I got a payrise after about 6 months had passed.
It seems jeremyr that folk don't like the idea of paying for their own lifetime needs. Much of the discussion on this thread seems to be seeking ways that somebody else pays.
But of course if all of us -everybody - needs to have somebody else pay it's clear that that somebody does not exist. So lets fool ourselves.
We already do tax capital. It is specifically written into taxation law and is also again applied via the bright line test. If you are in the business of earning income via capital gains you must pay tax on those gains. If you sell a property that is not your own residence within 10 years of buying it, you pay the tax. The problem is that is not enforced (the bright line now maybe), and that is on the government. Why have laws you don't enforce and then complain about it? I don't see the logic.
Can I complain about them not enforcing the laws? And you can't tell me the proportion of capital that is taxed is in any way comparable to the amount of income tax that is bought in.
And the brightline test only covers a very small percentage of capital. Tax needs to be broader to be effective. A small land value tax would be a better and more stable source of revenue rather than capital gains which is pretty sporadic. Capital gains also negatively impacts those who have made improvements which is something we should ideally be encouraging to a degree. Land value applies only to unearned capital from rising land values which are the product of the investment and productivity of the wider community around them.
It certainly seems that way. Time is your friend, and it seems from here many people are out of it, and looking for someone to blame for poor decisions. Explaining what should have been done seems to be quite offensive to some, and just making some fictitious group of taxpayers pay seems much more rational.
I feel like we are out of sync here a bit. I actually agree with your fundamental point that people should be taking personal responsibility and aiming to fund their own retirement. Im in my mid-20's and thats my current plan, I 'm assuming the worst and that everything is going to be pretty cooked by the time I reach retirement.
Where I am disagreeing is with the numbers which is admittedly more knitpicky, just the reality of living today is that on a median wage its actually pretty difficult to save and get ahead, especially if you don't have any parental help.
Yeah your average rent in an area that doesn't require any transport costs is probably pushing closer to $250 these days. Food I would say realistically you're looking at a minimum of $8-10 a day which adds up to $250-300 a month if you're shopping very conservatively.
I guess this proposed budget would also forgo any social life as I find that tends to add up pretty fast and refusing to buy a $10 beer with mates is a good way to socially isolate yourself unfortunately if we are being realistic. Guess another $40 a month there. Most people might buy a cheeky takeaways at some point so add another $10-20 a month there if we are being stingy.
You've also got medical expenses that can throw curveballs at you. Around $50 for a GP visit, can always add up to more or less. Most people will have transport costs as well so you can add that another $100-200 a month after that not including the expense of buying a vehicle in the first place. Cheapest public transport is probably in Otago with the $1 bus they have there so a month of transport will cost you $40 provided you stay at home all weekend. Phone plan is needed as well, cheapest is kogan so around $260 a year for that. Your're not allowed hobbies if you want to have house apparently so don't need to go into that.
Tax is also pretty up there for someone on $50k once you factor in student loan repayments which take 12.5 percent of everything over a 22k. Tax itself once your on 50-60k is starting to get clipped at 30 percent. Majority at 17.5 though.
After all that you aren't going to be looking at $1500 of savings but realistically probably something closer to $600 which isn't all that much in the grand scheme of things. Its pretty easy to make a magical budget pulling numbers out of thin air but real life tends to be a lot more complicated than that and the cost of living certainly isn't getting any lower.
Your responses say it all, any "nitwit" as you call us, can read between the lines of what you are saying and see you had opportunity, made good Informed choices and lived well under your means.
Enjoy the silver spoon Jeremy, the rest of us with our wooden spoons will be the majority making the decisions from now on. And with that I'll rest my case.
Sure, make your decisions. You should have really made them decades ago. Your decisions are unlikely to make any difference whatsoever now, and that is the reason for most of the complaining. That realization has happened. My assets are not here anymore. I must have anticipated some of the decisions that you and your so-called majority of forward thinkers are going to come up with. Good luck.
"Labour raised taxes from 33 to 39% so we could get good healthcare, in the Clark government. What did we get....nothing" - actually they paid down massive amounts of crown debt which saw us through the GFC almost unscathed. If we had 100% debt to GDP like many other countries then NZ super would be long gone.
The flipside is they significantly underspent on infrastructure as our population grew and we have missed out on the increases in productivity that would have flowed through from it - a lot of which we still haven't built yet.
Fiscally? Sure, great stuff. But in terms of strategic investment for national infrastructure, it was a disaster.
Replace most of NZ super with free accommodation for retirees. Thousands of 2 bedroom units up and down the country that are available for retirees to move in to if they cannot afford to fund retirement in their own accommodation. Sell your oversized 3-4 bed home in a prime location so that it can actually be used efficiently, pay off the mortgage and live off what is left in a community full of similar retirees.
Of course there are gaps, fill them based on need, as we do with benefits. But the main point is for those who didn't accumulate enough wealth to fund themselves in a dream retirement, instead have them in efficient/safe accommodation suitable for seniors. Add on top the benefits of community and proximity to programs to support the elderly. It has to be well executed (OK here's where it falls apart huh?) and comfortable so that there is a real desire to move in with your $500K wealth and have that cover the fun things in life. I guess its a pre-rest home lifestyle.
...Maybe bills are covered by the service - why have retirees all paying $100 a month to telcos for phone and internet that they barely need, organize and fund this for them at a much better price point. Seniors aren't throwing loud parties so apartments and units are entirely practical.
This is a debate being had in many developed countries.
The main issue I have is that the premise of the tax that I am asked to pay includes that I am eligible for super on my retirement. I am 2/3 the way through my working life and have configured my exit strategy from employment based on this occurring.
The goal posts need to change but it has to be phased in to allow those of us with mature exit strategies to adjust our glide path to a shortened runway without crashing. Don't let the government's lack of planning be my emergency is all I that I am asking.
I agree - change is needed. However that 27% didn't just happen overnight - any year 11 economics project could derive population data about the growing aged population. Shaped curves planned over 4 decades don't respond well to right angles being abruptly introduced is all I'm saying - especially when this is a slow growing problem seen coming for years.
This. Remember that the government effectively controls your contributions.
My guess what will happen:
Along will come a superannuation crisis. A kiwisaver provider(s) gets into trouble, and the government bails them out and nationalises all other kiwisaver funds much to everyone's relief.
Universal super becomes unaffordable so it becomes means/income tested, as it is in most other countries. Kiwisaver will become compulsory if it isn't already.
Kiwisaver must be converted to an annuity upon retirement (to stop silly people frittering it away!) and that annuity forms part of the means test. The noose is closed, kiwisaver is now effectively a tax.
I have a major problem with additional tax for retirement. It'll become a piggy bank for which ever party is in government. I could not trust any of them to apply all the additional tax to retirement savings. It would go into a general pool and be raided by the parties starting with the Greens and Act using it to fund something. In the case of ACT to make up for their tax cuts. In the case of the Greens to fund some wasteful social project. Labour and Nats some where in between.
If only there was a transparent ledger that over time showed the additional tax contributions.
Oh wait, we already show this with the Super Fund.
https://nzsuperfund.nz/performance/investment/monthly-returns/
The ledger is only transparent because Kiwisaver was set up with the IRD collecting on behalf of the employee/contributor with the govt handout shown as well. The govt handout comes out of general taxes and has been switched on and off or reduced by the govt of the day. The Kiwisaver is for an individual. If you have an increase in general tax for retirement what portion goes to those who were unemployed, part time employed or who work only a portion of their life?
I'm all for retirement savings but it has to be transparent and again I don't trust any govt to be sufficiently transparent by saying we are hiking the tax rates by x% and that'll go for the general population retirement, including those who have either not joined Kiwisaver or have limited savings in KS.
As Alan Greenspan said, "there is nothing preventing the government from creating money and giving it to someone but the resources must be there to spend it on" https://www.youtube.com/watch?v=DNCZHAQnfGU
The problem is that retired people become only consumers rather than producers and so we still need to produce all of the goods and services to support a retired population and possibly with a reduced workforce. Resources are the issue and not money. Individuals can store up money as savings but the government cannot as it is always pay as you go for a currency issuing government. The government never uses taxation to finance anything, it spends first and then it taxes back.
Why don't we just euthanise the old? It is legal now.
The endless burden of the baby boomers, who own over 50% of the wealth and now demand we support their enormous economic burden with fewer workers.
Young men, who are the main engine of productivity, effort and innovation in any society, have zero reason to have a vested interest in this society. Between hoeflation, completely unaffordable housing, extreme child raising costs, the dysgenic and burdensome government, this society is increasingly not worth participating in.
The way the education system is going…see curriculum refresh it’s a possibility it will happen in the future. The indoctrination that labour has introduced is scary. If you don’t believe me download it. I have always wondered why Jews didn’t leave Germany prior to Hitler, allot did but many rich Jewish families who could have escaped didn’t. Of course they would have scoffed “don’t be stupid that could never happen”…look at the “evil boomers” mentality in this country (and I’m not a boomer)
ABSURD.
We are entering an age of AI that will strip workers of their jobs and the owners of capital with AI systems will plunder everyone else.
There is no justification for NZ Super to be any higher than any other benefit inclusive of some factors to allow for the health of a person. It’s ageism.
Those that want higher super can save via KiwiSaver or if healthy enough work.
On average everyone is living to an older and older age yet we refuse to move the age of entitlement. Politically it’s impossible to do as well because the population is skewed towards older age groups.
The young already ripped off by university fees and astronomical house prices are being screwed over. Any tax increases now are also going to mainly fall on anyone but the baby boomers.
NZ super should not be tampered with.
People rely on it and plan to receive it after a hard working life most people undertake.
Making it income means tested is inequitable.
After all the wealthy pay more taxes to support the scheme anyway, and then the benefit is taxed if they are on a high income in their retirement. So its already means tested to some degree.
The scheme should be paid for by taxes and a via the NZ super fund set up to meet the ongoing liability like ACC manages. If the fund is in adequate then raise taxes.
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