Don’t panic on pensions
Sunday Star Times Oct 13th, 2013 D1, D5
Fears of a massive unaffordable pensions blowout in future may be easing as analysis suggests a sustainable solution is achievable.
Measures proposed by the Retirement Commission are estimated to cut the cost of NZ Super to about 6.5 per cent of GDP by 2060 – a level seen as costly, but affordable.
Retirement Commissioner Diane Maxwell said the measures were designed to be the last big changes needed to make the universal state pension sustainable in the face of an ageing population.
Her comments follow analysis from the University of Auckland’s Retirement Policy and Research Centre showing a consistent decline in Treasury’s estimates of the future cost of NZ Super.
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On Wednesday in the Focusing on the Future report the Commission for Financial Literacy and Retirement Income proposed progressively raising the age of eligibility for NZ Super (currently $21,336.64 before tax for a person living alone) as life-spans increase. Continue reading
On 9 August Foreign Affairs Minister Murray McCully announced improved pension portability for those looking to retire to the Cook Islands, Niue and Tokelau from New Zealand. People who are entitled to NZ Super will be able to depart New Zealand to live in one of these three countries after the age of 55 and apply, without returning to New Zealand, for their NZ Super once they turn 65. Currently people would have to stay in New Zealand until turning 65 in order to qualify. The new policy will need legislation to be passed and is expected to apply from 1 July 2015. Alec Waugh, Chair
Sunday Star Times Published today, 4 August heading SUPER IS SUPER
Mark Brighouse “Sweet dealing Super for Baby Boomers” read like an apology for the Generation X inability to plan or take a positive future approach, in preference to “the want it now” wish list. The answer to the Brighouse dilemma stares him in the face. The New Zealand Superannuation Scheme is a world leader with its simplicity and universality, and anyone advocating its demise, or replacement with a different formula, needs to examine their own financial and social knowledge. At a current 3.7% of GDP, we have one of the lowest cost schemes in the world, and over reasonable time spans, this will continue to be cost effective, and easy to implement. Its universality will avoid the costs and charade of asset and income testing regimes, and the impact of the current model satisfies a multitude of societal requirements and well-being standards. The only reason New Zealand will not retain current entitlements or in a similar form, consistent with the additional Kiwi Saver income stream, will be silly thinking or poor decision making by future governments. Current media commentators are yet to get the message our New Zealand Super model is the “crème de crème”. With a focus on economic productivity, the aged continuing to work longer and pay tax, and new measures and approaches which always appear over time, our unique taxable New Zealand Superannuation is model is sustainable and equitable
The Kiwi Saver special “On the Money “ July 27 made informative reading. But the issue of a compulsory income stream in the form of an annuity, over a lump sum on retirement requires addressing. The Australian Superannuation Industry acknowledges this is a real flaw in their system, and New Zealand should learn from their mistake. The gender factor and how to deal with intermittent breaks from employment also needs attention. Equally the fee issue is understated in the article. Percentage fees structures should be avoided, and there is enormous duplication in administration and back office functions. In the retirement income and age discussion it’s important to recognize that the New Zealand Superannuation model with its simplicity and universality is a world leader, with low administration costs. This principal requires reinforcement and highlighting, there is no evidence to support any viable alternative. In contrast to many countries New Zealand does not pay a tax free pension, the current after tax figure is 3.7% of GDP and over the next 20 years, any projected expenditure rise is very manageable, contrary to the alarmist’s propaganda.
Alec Waugh-Takapuna, Auckland