Vexing question of pensions

The vexed question of how affordable New Zealand Superannuation will be in the future has yet again been raised, without too much hope of a resolution as political parties give their respective views on a matter which should concern all Kiwis.

The National-led Government says it will not raise the age of superannuation entitlement, despite spending on the pension scheme likely to cost the country an extra $1 billion per year.

Finance Minister Bill English says we have spent 20 or 30 years in New Zealand arguing how future retirement should be paid.

New Zealand can afford the future cost of superannuation and voters have made it clear they do not want change, he says.

Mr English will, of course, remember the last time a political party - National - broke a promise on superannuation.

The fourth National government, of which Mr English was part, introduced the reduction of social welfare benefits and the introduction of fees for healthcare and tertiary education.

This was highly controversial, as was the retention of the superannuation surtax, a tax on old-age pensions which National had promised to abolish.

National was punished severely, with pensioners deserting it in droves.

It took years of apologies by MPs like Bill English to make any impression on the elderly.

And even then, it took a generation to get older voters back into the National fold.

Hence Mr English saying future governments are free to have discussions with the New Zealand public, but National had learnt fiddling with pensions is not welcomed by many New Zealanders.

Currently, superannuation payments are aligned to 66% of the median income.

Mr English has no intention of instead aligning superannuation with inflation and the cost of living.

Mr English abolished the $1000 government kick-start payment for people enrolling in KiwiSaver in his recent Budget, and now says it is affordable to enrol all working New Zealanders under 65 in the scheme in which a member's own savings is matched by employer and government contributions.

New Zealanders have shown a dislike for compulsory superannuation but the demographic landscape has changed since the last referendum was thrown out by voters.

Labour is backing away quickly from an unscripted suggestion of means testing government superannuation.

Act New Zealand says the Government has failed to grasp the seriousness of the superannuation problem and points to the quickly changing demographics of the country.

Now, there are slightly more than five working people aged between 15 and 64 for every one superannuitant.

By 2060, it is estimated there will be two and a-quarter working age people for every one superannuitant.

Although 2.5 million people have signed up to KiwiSaver, 38% are making no contributions to it.

Many of those members are likely to be children whose parents signed them up to take advantage of the now-removed $1000 kick-start.

A report by Inland Revenue says KiwiSaver's success in helping people who really need a boost in their retirement savings has been marginal at best.

So, what to do?

While 2060 seems a long way off, it is changes made now which will make a difference then.

New Zealanders believe they are entitled to government superannuation when they turn 65, but by 2030, New Zealand could be spending $30 billion on the pension.

In past years, there have been White Papers produced showing how crucial it is for New Zealand to deal with the demographic problem of superannuation.

Most recommendations are ignored.

The Government is now considering compulsory enrolment in KiwiSaver and a decision may be made within 12 months.

Mr English will not be finance minister in 2030, when the payment for superannuation balloons out to $30 billion annually.

He is gambling his vision of superannuation in the future is affordable.

Let us hope he is correct.

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