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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

NZ Superannuation: Another article from Michael Littlewood

This was written after National announced a pending change in Superannuation age of entitlement. Labour with a history of flip/flops  on pension age (National  little better) became the Government, and PM Jacinda has signaled no change to the current 65 years of age.

Be very wary of further change. Both main parties cannot be trusted and neither have a solid foundation, on  any rationale for change. I have on good feedback that  both the PM and David Parker the ideas man within Labour would love to change their position, so “on a whim” policy might occur. Hopefully MMP constrains stupidity on this topic.

Posted by Alec Waugh September 14