Treasurer Joe Hockey prior to his May 13 Budget, has announced plans to rise the Australian Superannuation age to 70. The Aussie Superannuation scheme is completely different to New Zealand, complex, means tested and riddled with exceptions. The announcement has a “knee jerk policy approach” “all over it, so comparisons with NZ are limited. Perceptions however play a role in all things, and our Tasman neighbours decision to move the Superannuation age upwards impacts on thinking here in NZ
The Australian retirement age is already scheduled to rise from 65 to 67 by 2023 under changes introduced by the former Labour government. The government’s policy shift would ensure the age continues to slowly rise through until 2035, with Australians born after 1965 having to work until 70
It interesting Hockey’s decision ignores the recommendation of its own Commission of Audit which wanted the rise to be put in place by 2053.
Early polling intimidates a back lash by Australia voters, and Kaspanz comment is this is a classic case of Government intervention on a major policy platform, which the previous government had already announced. Australian residents had begun to adjust to that announcement and started to realign their thinking and savings, and here is a significant U-Turn again.
Kaspanz view is the consumer wants consistency to be followed by all parties on retirement income, and significant change signalled well in advance. The debate leading to changes needs to be factored into that process, and the recent Australian change appears to breach those principles. The current New Zealand model of a Universal Superannuation scheme, funded from taxpayer revenue, is recognized as being world class, and along with the Kiwi Saver scheme , the New Zealand’s approach is sound. Not much to learn from the Aussies here!!!
In April 2014 the “ Future is Now conference” in Auckland reported the position of NZ political parties on this topic (taken from a review of various political party comments) , and it’s worth repeating.
Prime Minister John Key said today he was not planning a review of superannuation in New Zealand and was “comfortable” with the costs of superannuation. It was currently costing about 4.5 per cent of GDP and there were many countries where it cost in excess of 7 per cent of GDP. At the peak of baby boomers claiming super, it would cost between 8 per cent and 9 per of GDP. With our broad tax base, there are not many candidates for further revenue-raising by broadening tax bases. Therefore it is critical to maintain the revenue raising capacity of our existing tax system. A misguided attempt to direct economic activity by reintroducing cost-ineffective tax incentives into the tax code could severely impair our ability to fund critical government expenditures in the future.
Labour’s strategy is to upgrade the size and focus of our capital markets…. We will make Kiwi Saver universal. Every employee will contribute to their Kiwi Saver account, not only ensuring financial security for New Zealanders in old age, but also making a significant boost to available capital for investment now. We have seen the success of this across the Tasman. I want to replicate that, and
I know I am supported in that goal by many New Zealand businesses. We are also committed to restarting contributions to the Super Fund. This was one of the great successes of the last Labour Government, and it will be so again under the next one. Labour’s plan is to start steadily raising the retirement age, starting by increasing the age of eligibility by two months per year from 2020, reaching 67 years 12 years later. That’s a fair and reasonable way to ensure we can pay for our retirement and means that no one currently older than 58 will have to work beyond 65. We will also have an exception for those in labour-intensive jobs that can’t work after 65 and need super.
We need to deepen capital markets, and reduce our dependence on imported capital, through making Kiwi Saver universal. Too many opt out or are on contribution holidays. Once universal Kiwi Saver is put in place there is merit in stepping up contributions split between the employee and their employer over several years to reach a level sufficient to fund an adequate income in retirement. 9 % was our target at the last election. David Parker (2013) Compulsory Kiwi Saver] would apply to all employees exempting only the self-employed and those with hardship, although high earners with sufficient saving will also be exempt. The option of extending Kiwi Saver to include a basic level of life and income protection insurance, as exists in Australian group superannuation schemes, is again something worthy of further discussion as policy develops over coming months. Jacinda Ardern MP championed an inquiry into New Zealand’s overseas pension policy to address anomalies that National did not support at committee stage.
Maintain universal New Zealand Superannuation for all New Zealanders 65 years and older, adjusted annually in accordance with movement in the Consumer Price Index, and within the [current] constraints. Automatic enrolment in Kiwi Saver (with an option to opt out). In light of the Saving Working Group’s recommendations and similar moves in Australia, the Green Party will create a public
To achieve the necessary economies of scale, the fund will be managed by the Guardians of the New Zealand Superannuation Fund… The front-end provider could be Kiwi bank or the IRD, as recommended by the SWG, depending on where the most efficiencies of scale can be located. The public Kiwi Saver option will be one of seven default providers. When Kiwi Saver is reviewed in 2014, we will examine the option of making the public fund the sole default provider. Restrict the dollar for dollar abatement regime on overseas pensions to apply only if the overseas pension is paid from overseas government schemes funded through taxation (similar to New Zealand benefits). Treat income from contributory overseas pension, superannuation and savings schemes no differently from other income for benefit abatement purposes.
Compulsory Kiwi Saver. Keep the state pension age at 65. Raising the pension age is a quick fix to a ‘crisis’ created by those promoting the private pensions industry. At only 4.1% of GDP, NZS is far more affordable than many OECD countries. Winston Peters told NZ First’s annual conference in Christchurch yesterday that the party wanted to effectively nationalise Kiwi Saver by putting it “on the same footing as the New Zealand Super Fund”. That meant “world-class, government-commissioned savings fund management. We’ll call it the Kiwi Fund.” Money put into the fund would be state-guaranteed and because of economies of scale and “the elimination of hordes of ticket clipping fund managers”, costs would be reduced. Super Gold card extensions: Three free visits to a local doctor, 10% discount on winter power bills from May to October (NZ First 2013). Immigration: Abandon section 70 and extend the principle of proportionality to all so that entitlement to NZS for all pensioners is proportional to the years spent in New Zealand between ages 20-65 years.
It is critical that Kiwi Saver is made universal as soon as possible… The Maori Party agrees that the age to be eligible for superannuation should be lowered but the rate should not be reduced…too many of our people currently fail to make the golden age by which they are eligible to receive superannuation and they are therefore deprived of that universal right.
Compulsory Kiwi Saver. Maintain national superannuation [sic] as a universal payment for everyone aged 65 and over.)
Compulsory Kiwi saver will increase the saving rate of New Zealanders, deepen the investment pool and provide financial security and certainty in retirement. Give people the option of choosing to receive New Zealand Superannuation at reduced rates down to 60 or increasingly enhanced rates if they hold off until between 66 and 70. The provisions of Section 70 should only apply where the overseas pension in question has been fully funded from general tax revenues.)
Other minor parties -Conservative
Our policy is no tax on the first $25,000 which means that super payments would no longer be taxed. Our view is that only NZ citizens should automatically be entitled to government assistance where required. Residents however need to pass qualifying tests.
Posted by Alec Waugh.