Feedback is always good. Listening and adjusting Kiwi Saver accordingly is the harder part!
Posted Alec Waugh
Alec Waugh is the chairman of the Consumer organisation known as Kaspanz (Kiwi Saver, Annuities, New Zealand Superannuation Protection Association Incorporated). He chairs U3A Takapuna Finance and Investment Group. He has a Master of Public Policy and Bachelor Degree in New Zealand History. He retired as a Police Superintendent in 2006 after 38 years of service.
WHY CHANGE THE AGE OF ELIGIBIITY ETC FOR NZ SUPERANNUATION
New Zealand leads the world with its twin model of NZ Superannuation and Kiwi Saver schemes. Recognized as the smart country by many offshore analysts in its approach to pension policy, New Zealand Superannuation current costs and future projections costs out to 2060 continue as one of the lowest in the OECD. As Susan St John and Clare Dale in their 2016 paper said “The projected NZS expenditure appears modest, especially if net rather than gross spending is counted, and when compared to current pension spending in other countries.” Why then the proposal by the National Party to change the age of eligibility from 65 years to 67 years?
Part of the answer is a lack of knowledge on the topic. Only Auckland University has a very small dedicated Retirement Policy and Research Centre. Another complexity is the perception that longevity is increasing, when the real issue is individual quality of life in senior years. Some people may live a couple more years, but it’s the illness and injuries and inability to work that is the real issue. Economists have not helped with their crisis rhetoric and superficial comments. Developing social and public policy is not the expertise of these so-called experts, and their assumptions and long-term projections are often flawed. Further, the lack of comparative overseas research and information is often missing from the debate.
A range of New Zealand mostly male right- wing commentators compound both the facts and perceptions. These include David Seymour, Guyon Espiner, John Roughan. Peter Lyons, Matthew Hooton, Mike Hosking, Larry Williams, Leighton Smith, Brian Farrow and last but not least female commentator Fran O’Sullivan , who all make comments on NZ Superannuation which sound profound at first glance, but too often do not cut it upon subsequent examination. The voices of calm reason and substantial evidence flow from Susan St John, Martin Hawes, Michael Littlewood, Roger Hurnard and Mary Holm; while Diana Clements and Carmel Fisher also offer balanced views, with Bernard Hickey often writing provocatively, but has a depth of knowledge. John Gascoigne displays a wealth of understanding and income trends over time. The less said about the editorial stance of the New Zealand Herald on NZ Superannuation the better, superficial at best.
Judgments hopefully rest upon thoughtful and careful assessment of many issues. Be wary of those calling for policy change from just one perspective. The reality is no other alternative model of Superannuation outside of the current set up exists, a model which has assisted women and kept the elderly from poverty for generations. When you add in the fact that with retirement income issues there has not been a task force since 1991, and political parties have no accord between each other on retirement income policy, the potential for poor decisions is profound. There is no reason why NZ Superannuation does not continue for the generations to come!
The announcement by Prime Minister English contained elements of sound pragmatic political decision making. No changes for 20 years, and then a move upwards from 65 to 67 years. The change in residency entitlement (10 years residency to 20 years to qualify) is appealing to many New Zealanders. Our country has often had a liberal edge with that particular rule. English met the essential element of allowing for a long lead-in time, allowing consumer’s time to adjust both thinking and saving patterns.
But the announcement failed to address the Section 70 spousal issue of overseas pensions and a number of other minor adjustments could have been included which would have made the Prime Ministers’ announcement more substantial. It is of course a political announcement, vote for us and you will receive this offer.
Labour Party has announced the Status quo will continue. The issue here is that the Labour Party has recently changed position on this topic; the current position has the smells of electioneering vote seeking. Ironically their position is valid and sustainable, but a U turn is always likely on past performance. To date the new leader has been left off the hook, re her position on this matter, during the current campaign. Voters want consistency on pension policy and Labour to date has proven to be flakey.
What was needed, and would have provided a buffer for the Government announcement, was a task force report, similar to the Tax Working Group 2010. A political party making a policy call on New Zealand Retirement Income Policy without such material is risky policy.
What we do know is that over 40% of New Zealanders 65 years and over relies on our superannuation as their sole means of income. This statistic has remained basically unchanged for a long time and will continue to be a future trend. Kiwi Saver savings are not substantial enough to make a lot of difference. The intergeneration tensions are a red herring; history shows many look back with rose tinted glasses and those looking forward often predict doom and gloom.
Every generation makes adjustments to the challenges faced, but the research on the topic indicates it all evens out. A rising problem for those in the 40-60 years group is they are on the retirement income treadmill, continually being pulled in multiple directions, saving plans in reverse, as they financially support adult children, and also looking after frail parents. Pre-occupied by others needs is the trend for this group, their own retirement savings eroded.
This group is aptly called the “sandwich generation”. Work-place pension’s schemes have diminished rapidly over the last 25 years, and defined contribution schemes like Kiwi Saver have camouflaged retirement income gaps. Research suggests that providing child care for those less than 5 years old, is now the dominant responsibility of grandparents. They are also coping with their children not departing the family home and becoming independent, but staying longer (nesting) and an emerging trend of children having experienced study and work experience, returning to the family home in their later years, seeking cheaper living costs. Parental hospitality, parental loans/guarantees to their children are everywhere.
Today’s reality for many parents is they are supporting their siblings financially, detrimentally affecting their own retirement nest eggs. Its imperative parents ensure their own retirement income needs come first.
In summary the current model is sound, tweaking and minor adjustments are the only modifications required, and for any party suggesting rising the age entitlement of NZ Super, substantial lead in time (2 decades) provided , so saving habits and commitments can be realigned appropriately.