A top economist is calling for means testing of Superannuation and for the age of eligibility to be gradually raised to 70 years old.
It follows protests and riots in France following a proposed move by the French Government to raise the retirement age there from 62 to 64. The reforms themselves are controversial, as is the process by which President Emmanual Macron is going about the change, skipping a debate in the country’s lower house.
In New Zealand, the retirement age is set at 65. This is the age at which people can begin to access Superannuation, with the amount received depending on an individual’s income and tax code. It was increased on Saturday as part of an annual adjustment.
The Organisation for Economic Cooperation and Development (OECD) has said New Zealand needs to lift its Superannuation age to help keep debt levels in check. Aotearoa’s ageing population means the scheme is going to become more and more expensive.
Economist Shamubeel Eaqub was asked on Newshub Nation on Saturday morning whether we’ve failed to prepare for the ‘Boomer’ generation entering retirement.
“Of course, the Boomers wrote a blank cheque to themselves against their future generations,” he said.
Eaqub doesn’t believe New Zealand should have a universal system of welfare for retirees while at the same time having child poverty and infrastructure issues.
But isn’t there a social contract where people expect to receive Superannuation when they get to 65 after working their whole lives, host Simon Shepherd asked.
“They should have saved for it. It’s an outrage. It’s an outrage,” Eaqub said.
He said wealthy people shouldn’t be getting access to welfare payments.
“We should not have welfare for rich people when we refuse to invest the same amount of money and the same universality for children living in poverty. Those are the trade-offs that we’re making,” he said.
Eaqub said he doesn’t want the money “going towards rich, old people who did not save for it”.
But poorer people should “absolutely get it”.
His ideal system would include means testing and raising the age gradually to 70. He also wants to see the gap closed between benefits and Super.
Last year, Retirement Commissioner Jane Wrightson released a report recommending the age of eligibility for superannuation “must remain the same” or “a more complicated system be considered to reduce the inevitable inequity such a change would bring”.
“Any increase to the age of people accessing NZ Super will only further disadvantage women, Māori, and Pacific people,” Wrightson said.
Māori and Pacific peoples are expected to become a larger proportion of the working-age population over the next two decades, the report said, but will remain a “small proportion” of those who eventually get superannuation due to shorter life expectancies.
Eaqub said there should be a “more generous welfare payment for people who need it”.
“We should not have an inadequate welfare system. It’s spread too thin. What’s the benefit of giving this money to rich folk?” he said.
He said the system should also give people who need the payments “some dignity in old age because fundamentally our purpose of welfare is to give people dignity”.
“We’re not doing that.”
Susan St John, an Honorary Associate Professor at the University of Auckland who specialises in the economics of social policy and has written reports on Superannuation, told Newshub Nation that New Zealand has “buried our heads in the sand” over the issue.
Instead of looking at raising the age, she wants to consider potential different options.
She’s also previously looked at a clawback scheme where high-income earners aged over 65 would have to pay a tax on their additional income.
“Income would be taxed on a separate, progressive scale, so that after a cut out point at a high income, the effect would be that there was no advantage to having the grant,” St John and Claire Dale wrote in 2020.
“At age 65 a choice could be made either to go on the grant and have income taxed on the separate tax rate, or not to access the grant.”
She told Newshub Nation that raising the age of Superannuation would affect younger generations who already have it tough.
Having a lower Superannuation age for certain ethnicities would be “so complicated”, she said.
“If we leave the age at 65, which we should because of all the problems of people coming into retirement and not having fared so well in their late middle age, a lot of them have lost work and so on and are not well prepared.
“If we’re going to make it universal, then we need a clawback at the top end because we can’t afford to keep paying it to people who are super wealthy. It doesn’t make sense.
“For intergenerational equity purposes, so that the younger generation can see it fair, they need those changes to come in pretty soon.”
The National Party policy’s on Superannuation remains unchanged from what former Prime Minister Sir Bill English announced in 2017, that the age of eligibility would be phased from 65 to 67 starting on July 1, 2037. That was to reflect increasing life expectancies and the rising cost of the scheme
“Every 10 years life expectancy is improving by over a year-and-a-bit, so it makes sense when other jurisdictions around the world already have 67 entrenched as their retirement age, we see a rising life expectancy, and also we have a very staged, slow response to actually increasing it slowly,” leader Christopher Luxon said last year.
Prime Minister Chris Hipkins earlier this year said it’s not something he’s turned his mind to since taking on the role, but any change would be campaigned on at an election. The Government’s previously said it wouldn’t lift the age.
In January, a Newshub Reid Research poll asked whether the retirement age should remain at 65. The majority – 66 per cent said yes – while 25 per cent said no.
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