Retiring with dignity-see headline below This was the best I could find re a link

Headline was: With pension costs set to treble, calls to restrict eligibility are growing. Though many are willing and able – or financially forced – to work past 65, what happens when we want to stop? By Sarah Catherall.

Susan St John replied

The Listener is manipulating NZers over retirement  November 9, 2018

The latest Listener (Nov 10) proclaims “Fresh moves to raise the age of super to 67”.  I like the Listener but this article is at best misleading.

The Labour-led Government has given no indication that it is considering raising the qualifying age. In fact it has locked itself into promises not to raise the age. The Listener points to the NZ First’s private member’s bill just drawn from the ballot.  Yet this bill has nothing to do with raising the age. It is about raising the residency threshold required for NZ  Super to prevent people coming from overseas and getting the full age pension after only 10 years.

The Listener highlights the “growing  number of pensioners who struggle to live on NZ Super alone” and in a non sequitur seems to suggest that the answer is to raise the age to 67.  Many low income pensioners eke out NZ Super with part-time work, and cannot and probably should not work full-time. If there is no basic age pension income until 67, many more will reach the higher age even more impoverished.

In spite of the hype of the age going up already in selected countries, the OECD report cited actually says that by 2060 the average age will be 66.  In Ireland, where the age is already 66, there is real anxiety about it going up to 67 in 2021 and 68 in 2028  as old age poverty is already a problem there and women are especially affected.

The Listener article claims that we have one of the most ungenerous pensions in relation to the average wage. To support this proposition the article cites the Netherlands as having a pension over 100% of the average wage. However, that happy outcome is for a person who has not only fulfilled the 50 years of residency for a full basic pension but has made contributions to an occupational scheme for  a full-time, 40 year career at the average wage.

The OECD actually shows that New Zealand has one of the highest basic pensions (see Figure) at 43% of the average wage for a single living alone recipient. Because of low residency requirements and its universal character, NZ Super is one of the most generous basic pensions in the OECD.

There are very important social aspects to having a basic income for everyone at age 65. In this simple visionary idea New Zealand leads the world, allowing many of those over 65 to contribute to the critical voluntary unpaid activities such as caregiving, mentoring, and support of NGOs without which society would not function.  Perhaps Labour’s well-being budgets will properly value this contribution?

People are quoted in the Listener article saying that they love working into older age as it gives them a sense of pupose. There is nothing intrinsically better about paid work and many people find a freedom and satisfaction in doing the work they love if they can do it without having to worry about not being paid.

The underlying issue the Listener raises is whether we can we afford New Zealand Super. As Michael Littlewood says, New Zealand spends only around 4% of GDP on NZ Super and while this will rise, at its peak it will be still well below the pension spending of many other countries today. We don’t spend very much in subsidising private provison either. KiwiSaver subsidies are very minor compared to other countries’ expensive tax breaks for private saving.

To think that raising the age is some kind of fiscal saviour overlooks so many qualifiers. Importantly, as National discovered when they tried to do this, it needs to occur gradually over a long time period for poltical accpetance and to give people enough time to adjust.  National’s plans would have seen 67 years reached only by the year 2037. Fiscal savings would be miniscule for the first decade and even then the savings needs to be tempered by the additional spending in the welfare system for the many unable to work full-time.

What is the actual problem to be solved? Perhaps it is a simple one of social equity. Many of working age have little chance of accumulating a supplementary nest egg that will cover the needed extra $270 a week the article claims is needed for a good retirement.  All the while, these same working age people are taxed to pay for NZ Super for today’s wealthy superannuitants who may also still be working in highly paid jobs. Today’s taxes also contribute to the New Zealand Super Fund for a pension that may be harder for todays’ working age to access especially if the age is raised.

For most wealthy superannuitants NZ Super is a drop in the bucket. They don’t notice it. They certainly didn’t need the  expensive Winter Energy Payment. It is possible to devise a higher tax rate for the very well-off that could provide useful saving of at least 10% of the total NZ Super cost without causing anyone hardship. A   Retirement Policy and Research Centre paper shows how NZ Super could be changed to a basic income, the same non taxable grant for each person over 65, with a separate tax scale for other income. Around $1 billion a year could be saved very easily.  But this is just one potential option. First we need to agree what the problem is that we are trying to solve.

Raising the age a little is perhaps inevitable over the long term as people live longer, but it is no answer to actual problems ordinary people face.  Let’s hope the promised retirement incomes review in 2019 does justice to examining all the options for sustainability, fairness and affordability without just relying on the chimera of raising the age of entitlement.


*Kaspanz also replied to the Listener, but only the adjustment factor component got printed

Retiring with dignity by Sarah Catherall, was a sound and balanced article, particularly when compared to the crisis rhetoric from a number of commentators on this topic. New Zealand Superannuation is very good for women, because it is not linked to work or paid income. New Zealand Superannuation is also taxable, different to most other OECD countries. It is also very affordable, in both a comparative and future terms, only at risk for the next generations if our political parties do something silly. The model is a world leader, and along with Kiwi Server provides a stable foundation for retirement income planning. The longevity issues touched upon in the article, require careful analysis. The issue is not whether  one will live a number of years longer than anticipated, remember many  will not get the opportunity to grow old, but it’s the quality of life that’s important. Overseas research is appearing which centers on the ravages of illness and disease for those of senior years, technology may save some, but for the majority the last few years of life will be a struggle with illness and wear and tear. Finally we often forget the “adjustment factor” in looking into the future. Generations adjust to their circumstances, the good and the bad normally balancing each other, have faith that our young will cope as resiliently as we have with life challenges.

Posted Alec Waugh November 30

Good to see someone praising the NZ superannuation model


On line from BUDAPEST. John has been around the  business scene for a long time.

From: John Gascoigne <>

NZ Super: The World’s Best Pension

We have more than a highly successful government retirement programme in New Zealand. Sir Robert Muldoon’s National Superannuation Scheme is a world leader. National Superannuation ( NS ) which provides all New Zealanders with retirement income security is vastly superior to compulsory or privatised superannuation for these reasons.

Firstly, NS has successfully eliminated poverty if not hardship in old age, something the market does not do.

Secondly, NS insulates all superannuitants against the risks of inflation and stock market downturns or collapses. A future resurgence of inflation can never be ruled out. And capital markets do not always work well. Again, the market does not provide this kind of insurance.

Thirdly, governments can manage superannuation schemes far more effectively and efficiently the  private sector.

NS’s universality ensures  everyone is covered in retirement. Privatised superannuation does not cover those outside the workforce even if their contribution has been substantial, such as women for example. The unemployed, marginalised and so on are not covered.

Governments through large scale computerisation are highly efficient in managing superannuation schemes. The private sector, which charges fees, simply cannot match the very low administrative costs – typically below 1% of budget – characteristic of publicly funded, government managed pensions.

Fourthly, because NS is administered by the Government it is highly responsive to its “clients”, that is, the thousands of New Zealanders who, without other income, depend on it for retirement income. The Government’s recent payment to superannuitants for winter heating costs illustrates NS’s responsiveness. A need was identified and the Government could respond  immediately. Such ameliorative public action is foreign to the market.

Finally, NS achieves a modicum of national income redistribution which ensures even our least fortunate – whose number is growing – receive a basic level of subsistence. Privatised superannuation would only increase New Zealand’s already grotesque inequality.

But the greatest shortcoming of privatised superannuation – and this applies equally to kiwisaver – is how will future retirees support themselves who, either through profligacy, inflation or stock market collapse – outlive their savings ?  The result would be widespread destitution. Again, NS avoids all these problems.

Despite its success critics unrelentingly charge NS is “generous and unsustainable”. It is neither.

NS is hardly generous given that it is tied to a modest percentage ( 66% ) of the average wage of a low wage nation. Accordingly, those solely dependent on NS for retirement income are reduced to a fairly frugal, spartan existence. But hardship is far preferable to poverty in old age.

But the greatest criticism levelled at NS is that with the impending demographic bulge it will prove unsustainable in its present form. Again, the facts do not support the claim.

Some history. In the 1980’s critics claimed Sir Robert Muldoon’s  “generous” NS would become unaffordable by 2010. They were wildly wrong. NS’s gross cost in 2010 was $10 billion, or 4% of GDP or national income. The net ( after tax ) cost was just 3.7% of GDP. It proved very affordable.

Treasury projects NS’s gross cost in present form will peak at 7% of GDP by 2050, then decline. But some perspective is required. Presently, the average cost of public pensions across the EU is 12.9% of GDP, well above NS’s projected cost at the height of the demographic bulge. Accordingly, the EU nations are faced with three grim choices: raise the retirement age, increase taxes or reduce pensions.

Treasury’s projections, it should be noted, are based on the continuation of New Zealand’s suboptimal economic performance.

Fortuneately, New Zealand’s situation is vastly different from the EU nations. As superannuation expert Michael Littlewood recently wrote the critical factor in NS’s sustainability will be our future economic performance.

New Zealand is an under-developed, low national income, low wage nation in relative economic decline. Unlike the tiny, high income nations we simply do not have the massive productive sector ( relative to population ) which gives those tiny nations the world’s highest living standards and unmatched quality of life.

The Retirement Commissioner, Diane Maxwell, has cautioned economic growth will not suffice. She is correct. The solution is economic development. The greater the gap between our national income and population by 2050 the higher New Zealand’s living standards will be, including all superannuitants.

Achieving rich-nation status will require the appropriate development institutions, a permanent immigration stop and a massive expansion of our productive sector. Like Singapore and the Nordic nations we must become an export powerhouse. With rich-nation status New Zealand will have the best of everything, including extraordinarily generous NS. Its all very straightforward.

John H. Gascoigne2 Dallas Place,Leamington,Cambridge.Ph; 0221953160


New Zealand Superannuation: The Best!

Your Kaspanz editor is overseas for all of October, so here is an article on NZ Superannuation. *Note the Labour led Government has not implemented National policy as stated within the article, and the age of entitlement remains at 65 years

On my return look out for the 2018 Top 15, Retirement Income issues.

PS I may try to post an article from Europe, see how the technology works from afar


Tax review interim report

Press Release below from the Group

The Tax Working Group is updating the public on its progress and thinking with the publication of its Interim Report today.

Chair Sir Michael Cullen says that the Group has conducted a wide-ranging review in order to assess the structure, fairness, and balance of the tax system. The Group has also brought a broad conception of wellbeing and living standards to its work – including a consideration of Te Ao Māori concepts and perspectives on the tax system.

Thousands of New Zealanders – including iwi, businesses, and unions – have engaged with the Group over the past months. “The thousands of public submissions have given us a clear indication of the key challenges and opportunities for the tax system,” says Sir Michael.

“We see clear opportunities to improve the balance of the system by introducing environmental taxes, while measures to increase tax compliance would increase the fairness of the system. We have also identified important issues regarding the treatment of capital income in the tax system.”

The highlights of the interim report include:

  • The taxation of capital income.
    The Group’s work on capital income is not yet complete. The Interim Report sets out two potential options for extending capital income taxation: extending the tax net to include gains on assets that are not already taxed; and taxing deemed returns from certain assets (known as the risk-free rate of return method of taxation). Feedback on these options will inform the recommendations in the Group’s Final Report in February 2019. The Group is not recommending the introduction of wealth taxes or land taxes.
  • Environmental and ecological outcomes.
    The Group sees significant scope for the tax system to sustain and enhance New Zealand’s natural capital. Short-term opportunities include expanding the Waste Disposal Levy, strengthening the Emissions Trading Scheme, and advancing the use of congestion charging.
  • Housing affordability.
    The Group has found that the tax system is not the primary cause of unaffordable housing in New Zealand, but is likely to have exacerbated the house price cycle. The Group’s forthcoming work will include consideration of the housing market impacts of the options for extending capital income taxation.
  • GST.
    The Group is not recommending a reduction in GST, or the introduction of new GST exceptions. Instead, the Group believes that other measures (such as transfers) will be more effective in supporting those on low incomes.
  • Business taxation.
    The Group is not recommending a reduction in the company rate or the introduction of a progressive company tax. The Group is still forming its views on the best ways to reduce compliance costs and enhance productivity.
  • The administration of the tax system.
    The Group has identified a number of opportunities to improve tax collection such as increasing penalties for non-compliance as well as recommending a single Crown debt collection agency to ensure all debtors are treated equally. A taxpayer advocate service is also recommended to assist small businesses in disputes with Inland Revenue.

Sir Michael says that extending the taxation of capital income will have a range of advantages and disadvantages. The Group is still weighing up these issues, and will come back with firm recommendations in its Final Report in February 2019.

“Extending the taxation of capital income will have many benefits,” says Sir Michael. “It will improve the fairness and integrity of the tax system; it will improve the sustainability of the revenue base; and it will level the playing field between different types of investments. Yet the options for extending capital income taxation can be complex, resulting in higher compliance and administration costs.

“We have made some good progress in setting out the main choices and options – but there is still a great deal of work to do before we provide our Final Report in February.”

The Group’s Final Report will provide full recommendations on all of the issues examined by the Group, including the rates and thresholds for income tax.

“The Group will be mindful of the distributional impacts of any changes it recommends in its final report. It also recognizes that some people may need time to transition to the new arrangements.

“It’s also worth pointing out that any extension of capital income taxation would apply from a future date, and would not have a retrospective element.

“Everyone on the Group believes we have a unique opportunity to improve the tax system. We are all determined to deliver recommendations in February that will make a positive difference for New Zealanders,” says Sir Michael.

Read the Interim Report at

Posted Alec Waugh Wednesday, 19 September 2018