Closing Tax loopholes

The problem with NZ super

Yesterday I was at a retirement village and we ended up having a chat about the topic of the day - NZ Super. Here is a summary of why we can't wait around to deal with this issue.

Showing 25 reactions

  • Friend
    followed this page 2017-07-25 11:38:02 +1200
  • Kevin FitzGerald
    commented 2017-03-15 08:10:16 +1300
    Re UBI and super etc. It seems odd to have a wealth and asset tax to level the housing market but expect the elderly poor to go cap in hand to ‘the Welfare’ asking for more. Anyone who has been on a benefit knows how humiliating this is. Why not apply the same thinking to Super as has been applied to the housing market. Clawing back tax works if the law is well drafted and applied. No body has to beg. And do all families want a handout? Not everyone likes charity.
  • Kate Tyson
    followed this page 2017-03-14 11:05:55 +1300
  • DEnise Fitzgerald
    commented 2017-03-13 13:38:11 +1300
    It is refreshing to read John Robson’s comments and his questioning of what needs to be done for future generations. One vital component that is lacking at present is a compulsory, locked in retirement savings fund with contributions being made by employer and employee. The National Provident Fund used as a vehicle in the Kirk Labour Government met this need and had it not been made non compulsory by the Muldoon National Government would have prevented the problem that we are facing today with questions about the sustainability of NZS in its present form.
  • John Robson
    commented 2017-03-13 12:39:41 +1300
    A quick post in support of the remarks of Kevin Fitzgerald.

    I disagree with much of the framing of the current discussion/debate around NZ Super.

    The BIG question is what does a fair New Zealand look like?

    My short answer is that all are provided with a UBI.

    Which would effectively replace NZ Super (and a number of other transfer payments).

    To fund the UBI, all income (earned, ‘unearned’, inherited, gifted, whatever) is taxed progressively.

    If someone chooses to save their after-tax income, good luck to them.

    But when it becomes someone elses income – then it becomes taxable.

    o I note that NZ has one of the least progressive income tax regimes in the ‘developed’ world.

    o I note that NZ has one of the lowest ‘top rate’ of income tax in the ‘developed’ world

    o I note that NZ has one of the highest effective ‘base rate’ of income tax in the ‘developed’ world.

    o I note that NZ has one of the narrowest tax bases in the ‘developed’ world.

    o I note that NZ has one of the most regressive asset tax systems in the ‘developed’ world.

    No wonder NZ has one of the world’s fastest increasing levels of inequality.

    It is time for the ‘successful’ to play their part in creating a fairer New Zealand.

    It is time to change the tax/transfer/income system.

    Heated discussion over the one part of the system is a distraction.

    We need to focus on three steps.

    First, we need to know where we are.

    This is not the asinine remark it maty first appear.

    Most people have little understanding of the NZ tax/transfer/income system (e.g. they do not know that NZ already has a capital gains tax, and already has an asset tax…) – and they have even less understanding of the systems of other countries which might inform any debate.

    Second, we need to know where we are going.

    I’d like to think that all would agree that we are going to a fairer country – but even a cursory review of the Facebook postings would suggest that there are many who still use the ‘deserving-undeserving’ paradigm.

    Clearly they have never read Samuel Johnson.

    If they did they would know that unlike D.H.’s punk – they got lucky.

    The third and final step is agreeing how we get there.

    Does anyone really believe that we are ready for this step?
  • Kevin FitzGerald
    commented 2017-03-13 09:02:00 +1300
    For those interested in not subsidising the wealthy in their old age and in an affordable and realistic pension for the unemployed old there is an excellent paper published in Feb 2015 by Susan St John at the Retirement Policy and Research Centre, University of Auckland. It’s on line and discusses various approaches to making it affordable and looks at health costs as well. Fueling an inter-generational debate about who has ruined whose future is a real dead end.
  • Owen Williams
    commented 2017-03-11 18:54:55 +1300
    I listened to the news tonight and could not believe how out of touch that millionare is it may be OK foe him with his huge bank ballance but some of us on the pension need more not bloody less wake up you dips tick! Piggy Muldoon scrapped the original super and stated that we would be paid a liValle wage when we retired well we now get less than that and in fact we get way bellow the minimum wage time to pay for the people that have paid taxes and kept nz going for the past 40 plus years.
  • Richard StDenis
    commented 2017-03-11 14:09:20 +1300
    The following link discusses the superannuationin greater depth. Also has references to “experts” who indicate the super is affordable.
  • Oliver Krollmann
    commented 2017-03-11 13:49:14 +1300
    Denise, Gareth explained in his presentation that there is no fund or war chest for NZ Super – today’s taxpayers pay for today’s retirees. According to your statement I am a “newcomer”. I’ve been paying taxes since I started my first job here in NZ almost eight years ago, so I’ve been supporting retired people like everybody else. NZ Super isn’t dependent on how much or how long someone has paid taxes – it’s a fixed amount indexed to the minimum wage. I might already have paid more tax after eight years than someone in a low-income job has paid all their work life, and I might already have paid tax for longer than someone who worked for only a few years and then decided to stay home to raise kids, look after their family, or was dealt a bad hand and became unable to work. But all of that doesn’t count, does it? There is no track record how much or how long we paid for our own or someone else’s super.
    Given these facts, how would an additional 10 or 15 years of waiting time make “newcomers” like me any more eligible than born New Zealanders?
    Please note that I’m not a supporter of NZS as it is – I’ve laid out my point of view and ideas earlier in this thread. What I’m criticising is the double standard applied to born and immigrated New Zealanders in a system that otherwise doesn’t distinguish at all how much and how long anyone has contributed, and the related view that people like me are not one of your own people, despite the efforts we’ve made and requirements we’ve had to meet to live and work here.
  • DEnise Fitzgerald
    commented 2017-03-11 12:25:58 +1300
    Oliver – my comment that “we need to look after our own people first” refers to amount of time that a person immigrating to NZ needs to have resided here before qualifying for the NZ Superannuation entitlement (currently only 10 years with 5 of those being after age 50). With the Government proposing to raise the age of entitlement to 67 it is only fair that the residency requirement be increased to 20 or 25 years with millions of dollars being saved each year. NZ’s who have worked here all their lives need to be protected before newcomers.
  • Kevin FitzGerald
    commented 2017-03-11 09:55:30 +1300
    Sorry. Forgot to say this. If the criteria for getting an unemployment benefit is that one does not have a job surely the requirement for getting a retirement benefit is that one is retired from working. If it is going to be legit to supplement the latter with income then it is only fair that the former should be able to supplement their minute payout similarly.
  • Kevin FitzGerald
    commented 2017-03-11 07:42:09 +1300
    As an atypical baby boomer (never owned a rental, paid my children’s tertiary loans, gave them cars and generally support them, never voted National, Labour or NZ First since the early 70’s) I am frustrated by all this worry about super. The real question is how do we care for anyone who is no longer in work for whatever reason. Surely we are beyond questions of deserving and undeserving. It’s about perfectly legitimate need. If we are going to be a caring society we need to stop promoting greed and self interest as virtues and start investing in community. So: how about benefits for the unemployed for whatever reason (old and retired, sick, disabled, accident) all being the same and at a level that is effective? And set tax at a level that works for such welfare.
  • duncan cairncross
    commented 2017-03-11 00:46:19 +1300
    Gareth is doing what a lot of people do – he is being selective about his data

    YES – there will be more pensioners per taxpayer
    BUT there will also be LESS kids per taxpayer –
    and kids (0 – until they earn a living) cost more than taxpayers

    Not to mention that most crime is committed by the teens – twenties – with less of them there will be less crime

    Overall it is not a “massive increase in cost” – it is at most a moderate increase in cost
  • Oliver Krollmann
    commented 2017-03-10 16:04:47 +1300
    Denise, I take exception to your statement “We need to look after our own people first”, and I hope you didn’t mean it the way it sounds. I’m an immigrant who came to NZ in 2009 for a better way of life, and became a NZ citizen in 2014, pretty much as soon as I was allowed to – not to cash in on some benefit now or later, but because I’m proud to live, work and play here and be a New Zealander. I am now part of your “our own people” group, and I think I deserve no more or less than any other New Zealander.
    Having said that, I have no expectations of NZS, and I’m not calculating with or planning for it. It’s not what I came here for. I will make any and all efforts to be financially self-sufficient, once I decide to work less or even not at all, and it’s not going to be reaching a particular age that will make this decision for me. And that may very well be what we need to encourage and support people to do – invest, save and build a financial future that makes them independent and responsible, rather than tarring everyone with the same brush once they turn 65, 67 or whatever arbitrary thresholds we define.
    I understand that some will not be able to reach that goal, and I have no problem if they receive a supportive benefit that closes the gap and allows them to live a decent life in retirement. For those who want more than that, they should have to do their bit to be able to afford that, and accept that any benefits or superannuation payments would be means and income tested, similar to what the TOP 1 policy suggests for the 20% who can afford it – they would pay more and receive less, which is a fair price to pay for having more and needing less.
  • WALTER (Wally) Hicks
    commented 2017-03-10 11:37:37 +1300
    Onya Richard StDenis! Some excellent points. “Other ways to look at this” is the key IMHO. There’s room for … and its long past time for creative solutions …

    I tend to agree with you too Denise … Of the political party leaders I see, Gareth is the most likely to take up the challenge of ‘creative problem solving’ rather than tread the well-worn path of ‘polarisation’, blaming-and-shaming and what effectively amounts to ‘corporate welfare’ …
  • Richard StDenis
    commented 2017-03-10 11:23:33 +1300
    I think you are wrong about the super. There are other ways to look at this, what proportion of GDP will be spent on what proportion of the population? Most super recipients spend virtually all of their income so this actually fuels the economy. Productivity increases means their is a bigger “pie” to share. Immigration is adjusting the age ratios favourably.

    The reality is some people won’t see past current class relationships. They see a potential problem and use that as an excuse to exploit the working class more ruthlessly as the only suggested solution. How about getting the billionaire companies paying their fair share of tax? That is the fair solution Gareth should be looking for.
  • Rob Haughey
    commented 2017-03-09 21:09:14 +1300
    Keep up the good work Gareth, it is so refreshing to see sensible policies with guts.
  • DEnise Fitzgerald
    commented 2017-03-09 19:36:03 +1300
    I like a lot of what you say too Wally – let’s be creative and Gareth is the person to do this. Thank you.
  • WALTER (Wally) Hicks
    commented 2017-03-09 18:45:05 +1300
    I’d like to add to my comment below: What about an incentive NOT TO TAKE UP Super?

    There are no doubt plenty of people who don’t really need to. I’m no economist or financial expert but maybe the government could come to some accommodation with non-recipients whereby their entitlement (or an agreed percentage thereof) upon death – up to that time – is paid as inheritance to their heirs or as bequests to charities of their choice?

    I haven’t thought this out very long or clearly … but it follows from the simple premise: This Super is MY ENTITLEMENT … What do I want to do with it?
  • WALTER (Wally) Hicks
    commented 2017-03-09 18:25:33 +1300
    Essentially I am very much in agreement with Denise Fitzgerald on this. Make Super a universal entitlement at age 65. Don’t extend the age of entitlement. Maintain Kiwisaver and strongly reactivate the Cullen Fund.
    Then I propose a return to the Super Surcharge, so that people with incomes after retirement age and/or investment incomes pay their Super or a portion of it back as tax … People who don’t need it, although it will still be available later if they do.
    NZ should also consider Flexi-Super IMHO, with an amount per person based on population life-expectancy available per-annum pro-rata from age 55 or 60. The people Gareth speaks of who are concerned about the legacy we leave our children and grandchildren may wish to leave the workforce and make way for younger people?
    Finally, Kiwisaver can and must surely play its part in Superannuation as amounts saved over time increase? If not, why do we have it? Two or more things might be instigated: 1) Access to the investment (or interest) income after a certain level of capital is achieved? 2) Easier access to percentage of capital lump sums after a certain level is reached, prior to retirement age? 3) Kiwisaver Mortgage or Loan guarantee status [if not currently available]?
    These ideas may seem like incentives to retire early? I counter with: How many people would see the JobSeeker benefit, even considerably increased as a ‘community wage’, as an incentive to give up much higher paid jobs, which they may have trained for years to do?
    I don’t think there’s any problem with maintaining Universal National Super in perpetuity and, indeed, I believe creative Super and retirement policies are only just beginning to be explored. The best of these will flow-on to achieve economy-wide positive outcomes.
    Pity none of the major parties are doing so, including, it appears … sadly … TOP
    Another sign of election year … the old political footballs come out … Who shall we kick around … I know … Beneficiaries! We’ll call the unemployed “unemployable” … Sole Parents “bludgers” … and our Elders ‘unsustainable beneficiaries’ rather than honour our social contract with them …
    We Kiwis are better than this perennially negative stuff … If its not working … fix it so it does work!
  • DEnise Fitzgerald
    commented 2017-03-09 17:09:54 +1300
    I do not agree with you Gareth, in NZ we have what is called a “social contract” whereby each generation pays for the those who have gone before. Super annuitants pay tax on their retirement income and investments and many are also in the workforce in their 70’s and over if their health allows and let’s face it the amount of NZS is very modest – $370.00 after tax for a single person living alone with no other income is hardly exorbitant and those who don’t own their own home and who are completely reliant on NZS are pretty much on the bread line. The fact that it is universal and not means or income tested is also very important. In a survey released this week NZ was Number 1 for retirement comfort over 80 countries. Let’s keep it that way. We do however need to stop paying NZS for overseas immigrants who have been resident for only 10 years, this must be taken out to at least 25 years (or not paid at all). We need to look after our own people first.
    The Government must start contributing to the so called Cullen fund ASAP. It is now worth 33 billion and hasn’t had money paid into it for the past 8 years. NZ also needs to introduce a 3rd level of retirement savings – a compulsory locked in scheme for all income earners. NZS is an entitlement and not a benefit.
    Gareth, I thought you were cleverer than this – don’t disappoint me.
  • Freds Dozell
    commented 2017-03-08 19:56:01 +1300
    Well done Gareth. My husband and I are pensioners; we new about Muldoon but had no idea that Super is paid out of current taxes. This would be news to hundreds of thousands of New Zealanders. But how do we let them know.
  • Nathan Rattray
    commented 2017-03-07 16:52:15 +1300
    Right on the money.
  • John Cussins
    commented 2017-03-07 16:27:54 +1300
    Bravo Gareth.
  • John Cussins
    commented 2017-03-07 16:17:09 +1300
    Bravo Gareth.