Super sized problem

Written By: - Date published: 10:32 am, February 6th, 2012 - 38 comments
Categories: benefits, national - Tags: ,

I feel a bit sorry for Key and co. The coming term isn’t going to be nearly as much fun as the first one. Here, for example, is one issue that they’d desperately like to go away. But Treasury have dumped it right in their laps:

Treasury warning over cost of super

The Treasury has warned Finance Minister Bill English the Government must start addressing the pressures of future superannuation costs and it makes a case for lifting the retirement age – one of Labour’s policies going into the election.

The government wants to do no such thing of course. That’s a hard problem, and they don’t do hard stuff.

It [Treasury] also argues the case for less variation in taxing capital – again similar to Labour’s election policy of a capital gains tax.

Yes, Labour’s policies actually realistically addressed the elephants in the economic room, and set out a clear way forward. Too late to cry abut it now though, that ship has sailed and we’ve got the Nats. If they can’t drill it, mine it or sell it they haven’t got an answer.

In the hard-hitting advice on superannuation, the Treasury says leaving the retirement income settings in place would have to lead to higher taxes, which would harm growth, or large cuts in spending on other areas such as health and education.

It says that as the baby-boomers move into retirement, New Zealand’s 65-and-over population is projected to grow nearly four times more quickly than the total population over the next 15 years, contributing to a rapid rise in health, aged care and New Zealand Superannuation costs. … It says the current acceleration in the growth of the older population makes it “a matter of priority for New Zealand”.

The Nats will ignore the issue. It isn’t going to explode in the next three years, so as far as they’re concerned it’s not their problem.

38 comments on “Super sized problem”

  1. One Anonymous Bloke 1

    The National Party’s clients do not live in New Zealand. Why should they care what happens here?

    • mac1 1.1

      Then again there are the ‘patrons’ of the National party who have National as their clients. I wonder if they live in New Zealand?

      Now the ACT party is a client of National. They live here. So does the Maori party. And Dunne.

      All clients of Gaius Julius Keysar and his praetorian cohorts, Stevanius Serendipitas, Gerriander Cera Maximus and Bilius Anglicanus Apudipton.

      And then the rest of us plebs, fed on bread and circuses, or nowadays McDonalds and the Media.

      Time to join the Barbarians across the water, with the other Kiwi coloni, away from the Vesuvius to come.

  2. foreign waka 2

    How much of this statement reflects their peers benefits, perks and health service access? How much of it is researched about people who are in retirement or going to be in the next 10-15 years? A comparison will lead the treasury people, who undoubtedly belief that the little people need to be euthanized out of the budget sheet once “unproductive”, that the income of ordinary Nzlandears is too much to die and too little to life on. Elderly people in the next decade and beyond will die prematurely because healthcare will not be easily affordable and the best that some can hope for is over the counter painkillers. These were the people, who with their taxes have helped to build the infrastructure you benefit from and who had, to a large extend lost their life savings in speculative adventures of your kind, being left on the scrapheap and lectured to! How many you say or dare to promise a guaranty, will have any money in their retirement fund, the kiwi saver? Will they also be without a roof over their head when they reach 70 like you so nonchalantly propose to those who have paid taxes all their life? How undignified has one to be to work for your outfit, taxpayer funded no less?

  3. tc 3

    The Nats killed off 2 previous schemes that would’ve solved this and dicked with kiwisaver (wow another broken promise) so this is par for the course…..the Nats have never ever given a shite about resolving this issue.

  4. Roger 4

    The Nats at the time will have a few options when the time comes that they currently roll out at other times, these are:
    1. Blame the poor elderly by trying to sell us the line that they made poor choices by not saving much with their low wages.
    2. Find a way to blame a previous Labour government no matter how long a bow they have to draw.
    3. Push through the changes prescribed above a couple of decades too late and under urgency.
    4. On an individual level, National MPs could just resign and bugger off out of the country to hang out with their wealthy bludger mates.

  5. DH 5

    I read the Treasury briefing and what is missing from it is the issue of super being a universal benefit. Presently there’s some 550,000 OAPs collecting super. How many own +million dollar freehold properties and how many have a comfortable private income? Does anyone have the stats on income of people over 65?

    I’d think means testing etc would be more effective at reducing the super problem. Could fix it completely now that baby boomer property owners have seen their nett wealth more than double in the last decade.

    • foreign waka 5.1

      Age of client at the end of June Clients receiving New Zealand Superannuation1
      2004 2005 2006 2007 2008
      Under 60 years2 4,507 4,205 3,899 3,484 3,179
      60-64 years2 12,815 11,971 11,072 10,303 9,781
      65-69 years 127,786 135,322 144,867 153,900 158,186
      70-74 years 111,757 111,329 111,240 113,201 117,332
      75-79 years 94,098 95,021 96,754 97,382 97,581
      80 years or over 113,661 117,367 120,993 124,447 128,217
      Unspecified 0 0 0 0 0
      Total 464,624 475,215 488,825 502,717 514,276

      Info from Ministry of Social Development.

      Current weekly income Gross/Net (as I said to little to live on, too much to die):

      Category Weekly rate
      Gross Net
      Single, living alone $389.14 $339.92
      Single, sharing $357.40 $313.78
      Married person or partner in a civil union or de facto relationship
      $294.08 $261.48
      Married or in a civil union or de facto relationship, both qualify
      Total $588.16 $522.96
      Each $294.08 $261.48

      Now, even with an increase in age to lets say 67 (Why on earth we want to employ someone at 65 to take the workplace of a young person is beyond my comprehension) it would in the best of all worlds save the money of about 70 000 people of which about 2/3 will have to go on a benefit because of health reasons (also taxpayer money). Ending up with some 25 000 x 13.5k. Maybe this kind of money could be saved by means testing including Trust funds. But I doubt this greatly as it would mean to cut the money supply to exactly those people who suggest taking even more from the people who, in their eyes, ought to maintain them.

      • DH 5.1.1

        Those figures don’t mean anything, they’re just the stats on pensions (and the latest was 2008) The important bit is how much private income people over 65 are earning, plus how much actual wealth they have. I haven’t been able to find any statistics on that.

  6. foreign waka 6

    DH – try this
    http://www.stats.govt.nz/browse_for_stats/people_and_communities/Households/HouseholdEconomicSurvey_HOTPYeJun11/Data%20Quality.aspx

    Go to the end of the page – there is a spreadsheet: Household economic survey 2011. Have a look, maybe this is wath you are looking for?

    • DH 6.1

      Thanks I have that already & I can find nothing about incomes of people over 65.

      Keep in mind I’m not advocating means testing, I was pointing out that Treasury haven’t offered it as a possible option when it clearly is one. Why have they left it out, why pick age over means?

      • Colonial Viper 6.1.1

        You’re looking at the wrong thing. Forget about taxable income of those over 65. You need to look at net asset worth.

        • DH 6.1.1.1

          I have covered that, re my comment about baby boomer property owners doubling their nett worth in the last decade. Income is just a place to start, to find out how many OAPs are receiving private incomes and how much they earn.

          • Colonial Viper 6.1.1.1.1

            Sure, I suppose it is a start. No doubt you understand that the wealthy have set up their affairs so they have valuable economic services provided to them (e.g. housing and cars) by family trusts etc. which you will never be able to categorise as income.

            • RedLogix 6.1.1.1.1.1

              Better is the Universal Basic Income system which eliminates the problem at root. Retirement is a wholly artificial and clumsy notion anyhow… just get rid of it.

              • KJT

                Agreed. A GMFI or equivalent is preferable. Accepting that everyone has a right to live at a reasonable level.
                But the problem of superannuation affordability along with the affordability of a lot of social programs is easily solved by making progressive taxation the same as Australian levels. E,G, 45% over 150k. FTT and CGT would help make taxation fairer.
                Not only does this keep income in NZ, but it increases local spending.

                • KJT

                  The un-affordability of super, welfare etc is a right wing meme which Labour should never have bought into.
                  A good example of “repeat a lie often enough, even those who should know better begin to believe it”.

            • DH 6.1.1.1.1.2

              Yes I do understand, I also understand that family trusts can be busted wide open at the stroke of a legislators pen. They’re protected only by law and governments make the law.

              • KJT

                Private trusts should be illegal anyway. The prime purpose of the majority of trusts is to avoid legal obligations such as tax, alimony and paying contractors.

                • DH

                  Don’t get me started. The biggest fan of trusts is the mob who push personal responsibility and they set up trusts precisely to avoid it.

        • foreign waka 6.1.1.2

          I doubt that this will be easily to come by – privacy laws etc. If you look at table 6 you can see that taxable income for the over 65 was in the majority up to 21k pre tax (couple). Compare this with Table 6a and you can see the same under “not in labor force”. Any income derived from savings, shares etc is taxable and therefore included. Not included are assets such as family homes and other property, shares ex tax.
          From http://www.bigcities.govt.nz/standard.htm this comment:
          The top 10.0% of wealthy individuals own over half of the nation’s total net worth, while the bottom 50.0% of the population own just 5.2% of total net worth.

          • DH 6.1.1.2.1

            Thanks, I was looking at the wrong tables that one does have incomes. It shows 5% of OAPs are earning more than $78k. (the figures are for personal income, not couples)

            I don’t even know if super is still universal, do the likes of Fay still receive it? But if it is I think it’s time to accept we can’t keep paying super to those who don’t need it. Whether it’s a total solution I don’t know either but it needs to be examined. And Treasury haven’t even mentioned it, why?

            • foreign waka 6.1.1.2.1.1

              As far as I know it is still universal. The very wealthy can reject it, but would they? One has to be careful with these wishes as it could hit a pensioner who bought his/her property in the 60-70’s which is now worth many times what was paid for. This does not mean that this person is rich, it just means that the property becomes more and more unaffordable. It is called asset rich and cash poor.

              • DH

                What’s the difference between rich and asset rich? Rich is rich, what form the wealth takes doesn’t change whether they’re wealthy or not.

                There’s never any perfect solutions, raising the retirement age brings it’s own problems too. Fine for those who work in an office, not so great for those who worked in physical jobs all their lives. A lot of people are plain worn out by 65.

                • foreign waka

                  Totally agree with retirement age. As for Asset Rich – this is an expression only. I know of many who have to sell their homes because they can’t afford the rates and upkeep. Right now, this means their life savings have not grown but have been reduced. This is unfair as these people have saved for all their working lives to get there and have in 99% of cases have no other savings. This is called cash poor.

                  • DH

                    Unfair in what way? Some people who bought houses in the ’60s & ’70s have benefited greatly from urban sprawl in the main cities while others who paid similar sums have seen little real capital growth in their properties. It’s certainly not a nice prospect having to move when you get older but there has to be some reasonable balance struck here.

                    I don’t agree with the ‘solutions’ being proposed but I think we do have to face reality & accept that the numbers don’t lie. We can’t keep spending more & more on super without some radical changes somewhere. We don’t have the money to pay for it.

                    • foreign waka

                      DH – you are running into open doors on the issue of affordability of super spending. I have some time to go and have all sorts of nightmares regarding my “lifestyle” when its my turn. Still, it does not look desirable to work til I fall into the grave despite those poundings my treasury and media. Nonetheless, I am not agreeing on the notion that today’s retirees have to practice this nightmare to give me some satisfaction that hell is for everyone.

  7. RedLogix 7

    The fiscal implications are a bit of a side-show really. My father was forced into an early retirement in his late 50’s; he’s now 85. He’s been retired almost 30 years, and he could live another 10. That’s a retirement almost as long as his working life!!!

    If my health holds together and I don’t go gaga, I could easily continue to work in my current occupation into my 70’s.

    Yet overwhelmingly this entirely arbitrary figure of 65 mandates retirement. Now there are those who welcome it, well and good to them. And there are those who experience it as an overwhelming sense of loss and irrelevancy. In a society that can only measure things in commercial terms, being expelled from work implies that you have become worthless.

    I’m not sure that fiscally tinkering with superannuation policies is going to change much. If there is one thing we could learn from Asian and Polynesian societies is the real meaning of being elderly, and how these entirely natural and inevitable transitions in our life should really be managed.

  8. foreign waka 8

    RedLogix, The Polynesian and Asian population have not state pension hence the family is taking care of them. There social structure is different, always was. And so is for most their life expectancy. So what do you do in the western society that has not had this pattern, where families are much smaller and often not interested to take on the elderly? It is in most cases the women who do the deed and often have to drop their employment – who is helped by that? Add another 2 kids to the household and the caregiver is on permanent Ritalin. And what do you do when the elderly gets sick, maybe very seriously? Most in a very high age have dementia. Have you ever looked after an elderly person that cannot help themselves anymore but is not seriously sick?
    If my health holds together and I am not gaga with 65 I will be perfecting my hobby’s and volunteer when possible. Hallelujah, I will say the chores are done, I am free.

    • RedLogix 8.1

      Yes … I appreciate your perspective. I think that was the point I was trying, probably rather badly, that the current ‘one size fits all’ model of retirement is very clumsy. Everyone has quite different needs; their families are different, the community around them, their health, their attitude to work, the type of work they can do or are interested in… if any. A huge range of variables… yet the current system rather mindlessly has a single cut-off date and after that its ‘waiting to die’.

      Personally as I mentioned above, some form of Universal Basic Income that applied to all adults.. regardless of age… is the way forward here. That way the entire concept of retirement becomes meaningless and people would then have far more control over exactly how they managed their transition from working life to something else, whatever else they wanted to do.

      Have you ever looked after an elderly person that cannot help themselves anymore but is not seriously sick?

      umm… yes. Much of last year in fact. A whole story in itself, but not mine for the repeating.

      • foreign waka 8.1.1

        RedLogix, sorry to hear that you have a sick relative. Hope you have some support too as this is often needed. My best wishes.
        As to universal basic income – sounds like a good idea, but would it not greatly disturb the concept of measuring effort and achievement? I could see this applied by a certain age but not sooner. Which brings us back to the universal retirement payment.It is my opinion that there is a flaw in the way NZ distributes the pension.
        trust funds – should be illegal as they do only one thing, hide income from taxation and hence is fraud. Basic Income at a certain age, when sick and very important – when raising children to the age of 3: this should by allocated by individual not by single or couples. Tax is paid individually, benefit should apply the same way. There has to be some form of development in public policy that recognizes that women often do work commercially and in the household. The latter is not recognized as a contribution to society and yet without it we would be living in caves, I am sure of that.
        I really feel that one has to contribute first before any demands can be made. My feeling is that of an innate fairness on this as a balance between give and take has to be struck. Theoretically, one can argue that all people are equally involved when fear of no income is removed. I am thinking aloud when stating that perhaps some free ride on those who see pride on making an effort, believing they will contribute on their behalf. This in turn will not be taken kindly by those who do work. Unless one advocates an Amish society, freedom always comes with a price. Then again, I may be wrong. You certainly made my think about it.

        • RedLogix 8.1.1.1

          As to universal basic income – sounds like a good idea, but would it not greatly disturb the concept of measuring effort and achievement?

          That’s a great question. Just for clarity the kind of system that I have in mind (and that espoused by Gareth Morgan for instance) is something like an $11,000 pa UBI for all adults over the age of 18, a flat PAYE tax rate of something like 30-35%, and a modest capital gains tax in the order of 15%.

          At the same time you eliminate all benefits and superannuation. (I know there are complications here … but I’m keeping this brief.)

          The whole idea of “but would it not greatly disturb the concept of measuring effort and achievement” comes from earlier periods of human history when it was relatively easy to measure the contribution any person made. It essentially says that your only worth as a human being is your ability to work. That’s a very materialistic and narrow definition.. but one that was adequate first aproximation until recent times.

          If people didn’t have access to paid employment they could usually access some natural resource in the commons… dig for pipi, plant some kumara or the like. Anyone had the opportunity to fish and feed themselves…but that is far less true in the modern world. If you live in a city, or even in the many rural areas.. and if you are unemployed the opportunity to make a meaningful effort to support yourself in far more constrained than it was in the past.

          Moreover there is the larger idea that human beings are inherently worth more than simply what they contribute economically. This idea tells us that basic human dignity and justice demands that all people should by right be able to access some minimum needs for food, shelter and welfare. Because while a person may not be in paid work, many will be nonetheless contributing in some valued way to their family or community… but at present we largely fail to measure that effort, far less reward it.

          • foreign waka 8.1.1.1.1

            Thinking, have started to read up on it – i.e Carol Bateman. Still a bit uneasy about the concept as it reminds me on a soviet communist model. Thinking – will have to read more….you won’t win me with 11k pa. in retirement as this means I have to find a live in partner so that I can pay for heating in winter. Still thinking, PAYE 30-35% ??? Huh on 11k p.a as well as 110k, still not won over. Thinking, what about the person raising kids, maintaining the household – can be classified as social work? No income, still thinking… I have difficulties with the numbers now as well as the concept. Need to go away and read what Mr Morgan wrote about it. Thank you 🙂

            • RedLogix 8.1.1.1.1.1

              Lets see .. on an income of say $100k you’d pay $35,000 PAYE and receive $11,000 in UBI.. net about $24,000.

              At present Superannuation for a single person is about $16,000 IIRC. There are a variety of ways to bridge that gap; one is to simply top up the difference in cash. Another is to extend the Gold Card concept to wider range of services and costs..like electricity.

              Bear in mind these numbers are just examples… the whole idea can be fine tuned a lot closer than I’ve described here. Gareth Morgan’s book “The Big Kahuna” is the most recent and comprehensive version I’m aware of.

              The system combines the huge merits of a totally flat marginal tax rate at all income levels and circumstances, with the basic social justice requirements of being inherently progressive in terms of total tax.

              From an ideological pov both the right and the left can find things to like about it… and it makes many of the distortions and problems with our current tax system, simply dissapear.

              • foreign waka

                RedLogix, its late and I have to get to work early – getting up at 5am, so I just put some 5 cents in.
                Lets see .. on an income of say $100k you’d pay $35,000 PAYE and receive $11,000 in UBI.. net about $24,000. …
                Unfortunately, don’t earn that much but what I meant was that 110 k will pay as much tax as 11k – does not sit so well with me, maybe the fact that:
                Super for singles is $ 310 per week nett, too little to live on, too much to die might be the reason.
                Need to read more on that subject as at that stage I feel that I am not contributing to that conversation. Have a great evening. chiao.

            • KJT 8.1.1.1.1.2

              I think it should actually be higher. At least equivalent to today’s superannuation. With a lesser amount per person for children. And taxes on economically dysfunctional high incomes, and/or wealth, should be higher than 35%.

              Unlike Roger Douglas, Don Brash and Paula Bennet, I do not believe starving people actually motivates them to look for work. Neither does 80% abatement rates. Beneficiaries marginal tax rate, if they get part time work, is much higher than that for millionaires.

              When there was full employment, and benefits were comparatively high almost everyone still chose to work.
              Muldoon claimed to know them all by name.

              A lot of opposition is predicated on the Rights idea that people work only for money or status. That may be true for those on the right, but even many of them do unpaid work for charity or the community.

              Most people work because of the sense of meaning in their life and the sense of making a valued contribution.

              Almost all the, career changer, Teachers I trained with took a drop in income to teach.

              Even, the few, teenage dole bludgers I have known soon get sick of it and start to look for something meaningful.

              I can tell you about many people who do low paid or volunteer work, for our communities, for much less money than they could earn elsewhere with their skills.
              In fact our society could not function without these people.

              Those bringing up children, for instance.

              In fact our needs and even most luxuries can be met with most of us working less than 3 days a week.

              Entrepreneurship and social capital may well increase markedly when the penalty for failure or doing a period of volunteer community work is not so harsh.

              • Colonial Viper

                Unlike Roger Douglas, Don Brash and Paula Bennet I do not believe starving people actually motivates them to look for work.

                The top 0.1% need large pay rises, performance pay, expense accounts and stock options as incentives to work.

                Everyone else need hunger, deteriorating conditions and less income as their incentives to work.

                In other words bonuses for US, austerity for YOU

          • Kotahi Tane Huna 8.1.1.1.2

            The various levels (of UBI, income tax, capital gains) really come down to what we need to pay for – perhaps with a modest surplus for a rainy day or to save up for stuff we really want like a national cycleway 😉
            …or a major weather event.

            If whatever model was finally adopted also closed the income gap a bit that would probably lead to a reduced budget in the long term as our social indicators improved.

            No doubt there’s some entirely ideological reason why this is all wrong…

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