Familar theme, full of myth, invalid percpetions and assumptions. https://www.thepost.co.nz/politics/360506039/will-pension-be-there-when-we-retire

I wrote to Tracy making this comment, and including my formal reply to Dominck Stepehens paper

Hi Tracy.

Your opinion piece I suggest contains more perceptions and myth, than factual evidence based research. The Generation X belief discounts completely that NZ Super is wonderful public policy, hailed by off shore commentators, with no alternative scheme even close.

The Myth that New Zealanders are working past 65 in large numbers is rubbish. Not only does health issues often prohibit, but the opportunity is not there, apart from the” educated”, rampant age bias compounding the issue.

NZ Stats collection count one hour per week as in paid work, skewing the figures. One day a week paid work should be the minimum to qualify as in paid work.

October 10.2024
“New Zealand Superannuation is the best protection against longevity
   risk, and we all need a good NZS system. It is quite possible that, despite
   the introduction of KiwiSaver, younger cohorts will need NZS just as
    much, if not more, than older cohorts, because of lower home
    ownership, lower wage growth, less stable jobs, and lower savings
    rates.”    From “Longevity in New Zealand report” Alison O’Connell. Alison O’Connell New
Zealand Society of Actuaries PHD

Dominick Stephens Treasury paper ‘Longevity and the Public purse’
became available Sept 25, 2024. His paper focuses upon longevity, and the
associated areas of government spending and revenue. It contained no
specific suggestions or policy solutions, but infers changes to
Superannuation and Health costs (big ticket items) will have to occur, fiscal
policy having to adapt.

Already several economic commentators suggest changes to NZ
Superannuation settings is required (means testing’s, entitlement age) In
consumer terms knee jerk reactions from the usual collection of numbers
people, most having no qualifications as public policy experts. Economic
voices are important, but keep in context, they have a narrow lens, their
voices for too long, attributable with sermon-like qualities. Both the
Retirement Commission and the NZ societies of Actuaries, have recently
produced papers, stating there is no need to change either entitlements or
universality etc.

Govt spending is one of political choice, and we already know NZ Super is
very sound Public Policy, with no alternatives suggested coming close to
viable alternatives. If more revenue is required tax changes in the sphere of
Capital gains/land tax/wealth are all suitable options to consider, do not
tamper with New Zealand Super. The current Government while espousing
expenditure cuts, gave 2.3 billion to already advantaged property owners,
with changes to the brightline test, Money is found for a questionable issue,
contrasting to the wonderful public policy of New Zealand Super.

Let us reinforce some of the key issues, repeat after me!!!

First challenge a myth. Means testing is a discredited issue, the educated
always using assets and trusts to camouflage their own income. Advocating
means testing, requires all trusts and asset protection schemes are
dismantled, leaving all income transparent. Means testing is admin heavy a
cost, but more importantly impossible to target accurately the perceived
group at risk, combine the 2 issues and you have an expensive mess.

NZ Superannuation has a unique feature of being taxable, also one of the
lowest costs in the OECD both currently and under future settings, assisted
by the NZ Super Fund reducing future fiscal costs.

Stephens highlights senior New Zealanders are continuing to work.
Remember only the educated are likely to find productive work in their
senior years, and coupled with the entrenched bias against senior workers,
the work issue for seniors remains highly problematic.

Stephens mentions in his paper, that NZ now has the highest proportion of those over 65
working. I question the accuracy of that statement, and the measure being
used compared to other OECD countries. Remember New Zealand uses the
stats collection of one hour per week, as being engaged in paid work. This
camouflages the issue; it would be more useful if 2 days a week of paid
work was the measure used . Those that can find work, are driven by costof-living issues, seldom the joys of opportunity.

Senior years are dominated by health issues and this issue of “life quality “is
far more important than possible increased longevity, starting to reverse
after a trend of increasing by approx. 2 years every decade. Several research
projects are showing senior health problems continues as a huge issue,
many people carrying significant problems, this is unlikely to change over
generations. Chronic neck and back issues, for smart phone users, will only
add to the growing obesity, hip and knee, cancer, heart, dementia, and
stroke conditions existing .

WHAT IS THE REAL SITUATION?

40% of those receiving NZ Superannuation have no other income source, a
figure which has been constant for a long period and is unlikely to change,
even with Kiwi Saver.

What does History say . Two of New Zealand’s eminent commentators
Martin Hawes and Michael Littlewood have strongly supported the New
Zealand Superannuation Model. Littlewood in a 2013 paper said” New
Zealand Superannuation (NZS) is one of the simplest, most effective, and most
cost-effective Tier 1 schemes in the developed world. We mess with it at our
peril” and Hawes said “NZ Super is a system so simple and cheap that we
need to give people certainty and stop playing football with it.”

Little wood repeated his comment in 2018, noting NZ Superannuation has
one of the lowest total public pensions spending in the developed world,
with most OECD countries spending today, what we might spend in 40
years’ time. No crisis here!

Move forward to 2024, the Retirement Commissioner and Society of NZ
Actuaries report reinforcing the above comments.

Why then is there such exaggerated rhetoric re pension unaffordability?
The answer is the tabloid media approach of headlines rather than article
substance, a lack of research discipline, by commentators. Poor knowledge
of trends over time, limited historical analysis, infrequent comparative
analysis with other countries and the misuse of economic assumptions
abounds. Projected future costs in 50 years’ time are worthless in their
accuracy; they do not consider future societal adjustments.

Roger Hurnard succinctly reiterated, in an excellent paper(2011) entitled
‘Mixed messages: the future direction of New Zealand’s retirement Income
policies’, that New Zealand Superannuation has several attractive features
• It is extremely low cost in an administrative sense because it is
funded out of general revenue, requires no individual contribution
records to be kept and places no compliance cost on employers.
• There is no cost in administering an income test or monitoring
changes in financial or employment circumstances.
• The absence of any employment or income test mans that there are
no built-in penalties from earning additional income beyond
eligibility age. The present value of future pension wealth embodied
in the scheme is unaffected by when a worker chooses to retire. This
feature helps to explain why New Zealand has one of the highest rates
of labour force participation of older people in the OECD.
• Knowing well in advance how much NZS will be worth, is a
benchmark for people to judge how much additional income they
need to plan for to achieve their own desired standard of living in
retirement.
• Standard amounts for each person signals fairness and promotes
social cohesion.

The current scheme covers longevity risk efficiently by providing a known,
fully indexed, gender-neutral annuity. This is advantageous for all,
particularly for women. ” Susan St John, from the Pensions and
Intergenerational Equity Hub, Economics Policy Centre at the University of
Auckland emphasizes the gender fairness of New Zealand Superannuation,”
it’s an equalizing force for women upon retirement.” We must acknowledge
this significant fact! Any improvement in our current low productivity
statistics will also cut future costs.

Maori voices unfortunately are silent on New Zealand Superannuation, any change to an older entitlement age hurtsMaori , already they can claim disadvantage from the present model

The issue is very simple. Nobody has been able to present a coherent and
viable alternative to the current model, with costs, fairness and political
realities addressed. New Zealand Superannuation has become a
generational transfer entitlement wrapped around family, equity and wellbeing principles.

The New Zealand Super model is a world leader, no
alternative system comes within a bull’s roar of its overarching benefits
across a range of indicators.
Neither is it perfect, but any cost saving requirements can be appropriately
managed by any number of policy levers, with only minor adjustments
required, to the current model.

New Zealand is the smart country with its NZ Superannuation model, let
that continue!

Alec Waugh