Who will pay for our super?

BY TRACY WATKINS AND VERNON SMALL

A $37 billion hole in the nest egg for future pensions is fuelling fresh debate over the retirement age as the first of the baby-boomers approach 65.

Financial commentator Martin Hawes said younger workers should prepare for a rise in the pension age from its current 65. "I think the odds are actually quite high. I couldn't tell you when, I couldn't tell you which politicians will be able to do it ... but I think the majority of us would know that the writing has been on the wall for a long time."

Retirement Commissioner Diana Crossan said a debate over superannuation was overdue. Her 2007 superannuation review floated a rise in the age of eligibility, along with income targeting, reducing the rate and other changes to make the pension bill more affordable.

Thursday's Budget scrapped contributions to the so-called Cullen super fund for a decade or more set at about $2b a year as the Government looks to rein in burgeoning debt.

Ms Crossan said the announcement had caused widespread alarm among retirees worried their pensions were under threat. "People are ringing in really upset, some angry ... they don't understand."

They had to be assured that their pensions were safe; if any changes were made to pensions, it would happen slowly. "We're not talking about somebody whose 65 now, or even 55 now. We're talking about people who are much younger and need the time [to adjust]."

Australia has recently announced moves to increase the pension age from 65 to 67. Other countries including Britain have done the same.

The Government says it will make up the difference in super fund contributions once its books are back in the black and that it is committed to a universal pension at 65, at current rates. Prime Minister John Key has promised to resign if National reneges on its promise.

But new Treasury figures show the contributions gap will leave the fund $37b short of what it would have been worth in 2030 when it starts paying out three years later than originally planned leaving hard choices over funding the pension bill to future governments.

Labour finance spokesman David Cunliffe said keeping pensions at current rates was a "mathematical impossibility" unless money was put aside now.

WHEN THE CUTS HIT

Scenarios outlined in the Budget have peak unemployment varying from 6.6 per cent to 9.8 per cent. The main forecast predicts it will hit 8 per cent in the second half of 2010 compared with 5 per cent in March this year.

The best-case scenario would be 148,000 people out of work at the peak. But the downside scenario is as high as 217,000.

Unemployment benefits are expected to cost $588 million this year, rising to $1078m next year and $1283m in 2012.

Increased unemployment means reduced tax revenue. The Budget warns of a reduction in core Crown tax revenue of about $15 billion in the next four years, including that from reduced income tax and GST.

Latest figures show about 115,000 people were unemployed in March. Work and Income figures show 37,146 were receiving the unemployment benefit.

WHAT HAPPENS IF I LOSE MY JOB?

Work and Income has introduced the "ReStart" programme a package of payments and job services to help people recently made redundant from fulltime work. Latest figures show 1507 people are receiving this package.

The maximum unemployment benefit for a single person is $190.39 a week after tax. A couple can get up to $158.65 each (or $317.30 combined), and a solo parent can get up to $272.70. You may also be eligible for extra help, such as the accommodation supplement.

It usually takes about two or three weeks to get the first payment, though it can take longer if you received a payment when your job finished.

You can earn up to $80 a week before the benefit is affected.

Work and Income also provides help with training and finding work.

- The Dominion Post