Opposition still cowering naked in the bushes: Cullen

I am especially proud to say that we have delivered on our pledges to older New Zealanders by putting in place a set of fair and sustainable policies in superannuation – fair and sustainable for today’s retired people, and for today’s working generation who are beginning to plan for their retirement in ten or twenty years time.

We have made two important advances on superannuation policy. First, we reversed National’s decision to reduce the benchmark for a married couple from 65 percent to 60 percent of the average, after tax, ordinary time weekly wage. By the time we came to power in 1999, that policy had effectively taken $21 a week out of the budget of a retired couple. We have restored that $21 a week, at an extra cost of around $210 million per annum.

We believe that to go below 65 percent for a married couple means forcing people into hardship, and this Government will not do that, especially as most retired people have only modest private savings or pension schemes, and are principally dependent on New Zealand Superannuation.

The policy of this government is to retain 65 as the age of entitlement for New Zealand superannuation. Just last month, National’s finance spokesperson and pretender to the leadership, Dr Don Brash, floated the idea of increasing the retirement age. This was not his idea; the ACT party thought of it first. Their argument is that, because life-expectancy has increased, so too the age of entitlement should rise. That is a very churlish policy. Dr Brash and ACT obviously believe that the most effective state pension system is one that hardly anyone lives to receive.

Indeed their policy runs counter to the whole notion of positive ageing. It would rob many New Zealanders of a period of their lives when they remain in reasonable health and can enjoy the fruits of their labours. It would rob young families of the time and energy of grandparents. And it would rob communities of many of their most productive and dedicated voluntary workers.

Our second major step forward has been the establishment of the New Zealand Superannuation Fund. The Fund will play a major role in making New Zealand Superannuation financially secure for the next fifty years.

Throughout my years in parliament, I have been pointing out that we cannot ignore the fact that, starting in about the year 2015, a permanently higher proportion of the population will become eligible to receive payments of New Zealand Superannuation. This change arises primarily from increasing longevity and declining fertility in the population, and is exacerbated slightly by the passage of the 'baby boom' generation into retirement. There is no point hoping this will not happen. And it is unforgivable for political parties to say they will deal with it at the time. By then it will be too late.

The Fund will prepare us to both fulfil the expectations of retired New Zealanders and to maintain stability in tax rates and in other areas of essential spending. It will build up a portfolio of Crown-owned financial assets over the next few decades while the annual cost of New Zealand Superannuation remains relatively low.

The Fund currently has around $1.3 billion of assets, and by 2007 it is expected to have grown to $12.4b (or 8% of GDP). It will peak at around 50 percent of GDP in 30 years time. Those assets will progressively be drawn on to supplement the annual Budget as the Crown's finances adjust to a much higher level of ongoing expense for New Zealand Superannuation. It is a smoothing mechanism for what remains fundamentally as a "pay as you go" universal benefit.

The New Zealand Superannuation Fund represents one of the most significant political initiatives in decades. For the first time we are planning how to finance our commitments over the long term, rather than each successive government trying to get the books into a decent state for the next election.

Provided that a National-ACT government does not undermine it, the Fund should greatly assist in the task of stabilising superannuation policy, and thereby providing for all New Zealanders an environment in which they can plan for retirement with certainty.

National, ACT and the Greens all opposed the establishment of the Fund, and have promised to liquidate it if they get the opportunity. What they won’t say is how they will address the issue of an ageing population in the absence of the Fund. Given that the cost of New Zealand Superannuation is forecast to rise from the current 4 percent of GDP to around 9 percent in the middle of the century, their options are limited. Indeed there are essentially only three things they can do:

• Increase taxes significantly, thus slowing the economy and risking resentment and revolt amongst working age New Zealanders;
• Reduce the rate of New Zealand Superannuation, like National began to do the last time they were in government; or
• Reduce the number of people who are eligible, either by Dr Brash’s proposal to increase the retirement age, or by a means-test, or (most probably) both.

Getting the opposition to come clean on their alternatives to the Fund has been an interesting game. At the moment they are still cowering naked in the bushes, afraid to emerge until they find some kind of a fig-leaf.

« Guardians announce further advisor appointments

AMP & Good Returns launch superannuation website »

Special Offers

Commenting is closed

 

Printable version

Email to a friend