New Zealanders deserve a better response to superannuation problems
The age for state superannuation will rise to 67 in gradual steps starting from July 2037. No one born before June 1972 is affected. The age would be 67 in 2040. Residency requirement for immigrants will rise to 20 years, (five of them after the age of 50). To start when legislation is passed in 2018.
OPINION: This appears to be National's response to the Retirement Commissioner's 2016 three-yearly retirement policy review. Really? It seems more like a gimmick to get rid of highly inconvenient questions about retirement policy.
A policy to raise the age, not starting until 20 years into the future, is a non-policy. National can't bind the future. Who can guess what a gender, distributional or ethnic analysis of this policy might look like in 2037? Government has made it clear however that it doesn't need any of that pointy academic stuff on this or any other issue to do with the ageing of the population.
National probably thinks its response to that pesky 2016 retirement review is done and dusted. Responses to the critical and complex issues of the ageing population have been reduced to sound bites by media. We get one chance, only once every three years, to have an in depth look at these issues as required under the 2001 Superannuation and Retirement Income Act. If National gets elected don't be surprised if they can the 2019 retirement review. Indeed this is hinted at by English who said "a review in 2030 could look at how the policy was tracking."
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Can we really accept that we have no problems right now? We pay the full universal amount to all at age 65 no matter how wealthy or if in full time work and don't even have a high enough top tax rate that would claw some or all of it back. Is the Prime Minister pretending that we can have universal provision and a low top tax rate at the same time as there is growing desperation and poverty among young families? The future of the ageing population depends on the investment in the young.
What is really irksome too, is that there is no acknowledgement of the growing hardship among the older group, especially for those who don't own their own homes. NZ Super on its own is not enough to live comfortably for a growing number. Basing policy on increasing average life expectancy means little for the individual whose actual healthy life expectancy is conditioned by his or her life experience.
National also plucked out of the 2016 retirement review a populist policy to raise residency requirements without considering the wider context. Once the law is passed in 2018, new immigrants will have to have 20 years residency before accessing NZS. Does that mean that returning New Zealanders are not subject to the same test? Maybe that is why response has been so subdued.
Government knows that many immigrants and New Zealanders who have overseas state pensions are treated very badly at present. Under Section 70 of the Act, any entitlement to an overseas state pension is deducted from a person's New Zealand Superannuation dollar for dollar. But some of these pensions look more like KiwiSaver and this deduction is often seriously unjust.
What is missing in National's plan is any redress for the unfairness in the treatment of overseas pensions. Work done by the Retirement Policy and Research Centre for the 2016 review on overseas pensions offered a policy option that raised residency to 25 years in the context of abolishing section 70.
Section 70 simply doesn't fit the changed 21st century conditions where retirement savings take a myriad of forms. For example, under current rules wealthy Australians who would get no state pension in their own country can come here with large savings from their compulsory scheme and get full New Zealand Super. Residency in that country currently counts as residency in New Zealand under a social security agreement.
Raising residency, reviewing agreements between countries, and abolishing deductions of overseas pensions from NZ Super needed to be viewed together. It is a shameful lost opportunity.
While the 70,000 people over 65 affected by section 70 have been forgotten, the failure to deal with the spousal provision is unforgivable. This small but highly iniquitous policy affects the spouses of those with overseas pensions. Just being married to the wrong man can see your pension docked because he has an overseas pension that exceeds his NZ Super. The excess is taken dollar for dollar even if you have only just married him, and even if you have lived your whole life working in NZ. Of course increasingly men married to younger women with large overseas pensions are finding themselves also caught out by this archaic law.
Unlike the rest of the western world that is grappling at a high level with policy for an ageing population, Bill English has also ignored the development of sensible ways to help people protect themselves from outliving their additional savings. KiwiSaver is just a lump sum scheme. Take your money and you are on your own. We have an ageing population with increasing dementia so fewer will be able to manage their lump sums and many will outlive their meagre savings pots.
Come 2030, when the baby boomers will start swelling the ranks of the high-needs group over 85, how are we going to pay for the long–term costs of those who have nothing left? By 2040 it is highly unlikely we will be talking about how great Bill English's plan for ageing was in 2017.
Honorary Associate Professor Susan St John is Director of the Retirement Policy and Research Centre, University of Auckland.