From the mid 1980s until the late 1990s the one certainty about superannuation policy in New Zealand was its uncertainty. Every government played around with it, to the detriment not just of superannuitants of the time, but also of those approaching retirement and hoping to be able to plan their futures with some certainty. National promised to repeal Labour’s infamous 1984 surcharge, only to replace it with something just as draconian in 1991. That was gradually watered down during the 1990s, and a multiparty accord established, which Labour then walked out of when it had succeeded in taking superannuation off the political agenda and Labour found it no longer had a weapon to beat the government with. Then National reduced the relativity of the rate of superannuation to the average ordinary-time wage, which was subsequently overturned by Labour and the current formula arrived at. A period of superannuation peace and stability was to ensue for about fifteen years.
It has to be said that none of us who were involved in superannuation politics of the time covered ourselves with any glory and that at least one generation of New Zealanders was given no reason to trust politicians on superannuation policy. It is probably true that Sir Robert Muldoon’s overly-generous 1975 election bribe of 60% of the average wage at age 60, developed as a simple reaction to the Kirk Government’s much more complicated contributory 1974 scheme which would have taken until 2014 to reach full maturity, was to blame for all this, but that was of little consolation at the time, or now. Superannuitants simply felt betrayed.
Over the last 15 years, a measure of stability has returned, and retirees, near-retirees and their families have been able to plan their futures with a measure of certainty. All of which raises interesting questions about National’s surprise announcement this week, that as a response to the ageing population, it plans to shift the age of entitlement from 65 to 67 between the years 2037 and 2040, affecting everyone born after the start of 1974. In an eerie throwback that suggests we could be about to get on the superannuation merry-go-round all over again, Labour now finds it convenient to renege on the raising the age policy it promoted at the last two elections.
It could be said that National has learned a lesson from the past with the long time-frame it has for the changes it is now proposing , although those affected, now in their early 40s and younger, may see it differently, having just paid off their student loans, and now raising their young families and meeting the mortgage costs. They probably will not feel downright betrayed as their grandparents did in the 1980s and 1990s, but they most likely will feel somewhat cheated.
The bigger risk is that National’s signalled intent – that is all it is at this stage, with eight general elections due before it takes effect in 2040 – sets off a further round superannuation uncertainty, the last thing anyone wants or deserves. And that raises the wider question about whether age adjustments are the best way to manage future superannuation policy. While it is true people are living – and working – longer, it is also true that the advent of Kiwisaver in 2007 has enabled many people to build up large retirement nest eggs, making them less reliant on New Zealand Superannuation in the future. At the same time, the focus now comes on the demographics of those with short lives post about 60, and how poorly they are catered for at present, In short, despite having paid their taxes all their lives, there are many who die worn out and exhausted before ever reaching 65, or shortly thereafter. And they get no, or very little, superannuation.
That is why UnitedFuture’s focus is on Flexisuper (the option to take a reduced rate of superannuation from the age of 60 if one wishes, or a higher rate if uptake is delayed to age 70) and compulsory Kiwisaver, rather than adjusting the basic age of entitlement from 65. That package addresses the issue of those worn out at 60, and also sends a clear signal about the value of long-term personal savings, and less reliance on the state pension. But, most importantly, it places control of retirement choices and income back in the hands of the individual, not the state. Under Flexisuper and compulsory Kiwisaver, people will be able to back their own choices and know they will not be interfered with by governments changing their minds.
The one constant in the superannuation debate of the last couple of generations has been that people have craved certainty. They opted for Muldoon’s unrealistic “too good to be true” scheme in 1975 because it was simpler and more immediate than the Kirk scheme. They berated Labour and National governments in the 1980s and 1990s for “mucking up” their retirement plans. Now, when the superannuation spectre is being raised again, many may well see it as too far in the future to get exercised about immediately. An irritant, rather than a body blow, but certainly an opportunity for people to take control of their own retirement destiny, regardless of what the state might impose.