For the past 35 years, political parties have wrestled with
the looming problem of paying national superannuation to
future generations, especially given the particular problem
of the "bulge" in numbers due to the post-war "baby boomers"
reaching retirement age.
New Zealand has carried the expectations derived from the
welfare state for so long now that it has become inbuilt, and
saving for retirement a phenomenon of only very recent times,
so reliant have the bulk of the population become on a
state-funded pension.
Those expectations were given a quite unjustified, cynical
twist in 1975, when Robert Muldoon helped buy the National
Party back into power by his scheme of retirement at 60 with
a non-means tested pension pegged at a generous 80% of the
average ordinary-time weekly wage, less tax, which was in
itself a response to Labour's limited compulsory contributory
scheme.
In the years of the Clark government, various attempts were
made to achieve a universal policy acceptable to all the
major parties, but these ultimately failed.
Eventually, what became known as the Cullen pre-funded scheme
appeared - no other politician or party had come up with a
credible alternative - which established the mechanism to
help fund future payments by setting aside a part of Budget
surpluses.
Its principal weakness was its potential impact on future
Budgets and future superannuation payments in times of
economic gloom, for the first decision in any future Budget
for the next 25 years will be the call on superannuation
funds, not less than $2 billion every time, and such a burden
will inevitably have an impact on other spending plans.
It has not taken long for negative circumstances to arise or
for a government to have to face the unpalatable.
National's expectation that the Crown faces deficits of up to
$10 billion, and for the next decade, is the chief reason why
contributions to the Cullen fund have been suspended, but as
Mr English has said, they will resume when the economy
returns to surpluses; that was why the suspension of
contributions was envisaged in the empowering Act.
The Treasurer's decision to suspend contributions is correct
because it makes no sense to continue with borrowed money.
The Cullen scheme was designed only to soak up surpluses - to
keep the "savings" in the bank, so to speak.
For the Government to now decide, when times are tough, to
borrow the funds to keep the scheme propped up would be to
concede that providing certainty in state superannuation was
guaranteed, no matter what, and never mind the true cost to
future generations.
The first casualty were this to happen would be private
savings. Government superannuation will never be more than
modest and there needs to be renewed vigor to promote private
savings to supplement it.
The task force on superannuation, which was the last
pre-Cullen proposal, attempted to take it out of the
political arena by encouraging private savings. The response
from younger people with good incomes has since been
encouraging, for many are now investing in retirement.
But older people with few income-earning years left before
retirement, and those without much disposable income to save,
especially women, are faced with a frustrating quandary: they
are being urged to save from small or non-existent resources
and warned they will otherwise face a retirement in poverty.
It is a prospect for this particular group deserving of
Parliament's further attention, particularly in a search for
ways where the costs of living for pensioners can been
reduced in key areas such as electricity and heating.
A name, residential address, and (preferably residential) telephone number is required from readers who comment on ODT Online. These details will not be visible to site visitors.