Super reform hits broad resistance

Policy makers are ‘‘between a rock and a hard place’’ when it comes to reforming New Zealand Superannuation, a new report has found.

The New Zealand Institute of Economic Research’s latest paper, Population Ageing – Do we understand and accept the challenge? investigated Australian and Kiwi attitudes towards the future of retirement.

The reforms that the report looked at included raising the age of entitlement, paying less to those with more assets or income, and reducing superannuation payments.

It found retired Kiwis were the most in favour of raising the age and increasing taxes, but the least in favour of tailoring payments to individual means.

Surprisingly, the support for raising the age or lowering the amount paid to retirees was lowest among 25 to 54-yearolds, even though those older would benefit at their expense.

Means testing, which would mean access to payments was restricted to those who don’t need assistance, was ‘‘not met with much enthusiasm’’, the report concluded.

But even those in favour of means testing were strongly against including the value of the family home in the assessment.

The report was commissioned by Chartered Accountants Australia New Zealand.

Australia is raising the eligibility for a government-funded pension to 67, with a planned further increase to 70. The United Kingdom has also committed to raising the age of state pension eligibility to 66 by October 2020 and to 67 between 2026 and 2028.

But in New Zealand, the Labour Government has pledged to retain 65 as the superannuation age of eligibility.

This commitment is projected to raise the pension cost to GDP ratio by 60 per cent over the next 40 years, while in Australia the same cost is projected to rise 25 per cent.

Superannuation costs New Zealand an estimated $30 million a day, and this is expected to rise to $288m by 2050, Retirement Commissioner Diane Maxwell said last year.

Threequarters of Kiwi respondents in NZIER’s survey recognised superannuation was getting more expensive, but they tended to underestimate the extent of its rising cost.

The report zeroed in on how politically acceptable the various ‘‘fixes’’ would be. But no one option seemed to lead the pack. The most popular option across all age groups was no immediate or future change, even if it was phased in over 10 to 20 years.

Chartered Accountants superannuation leader Tony Negline said the report showed politicians ‘‘were between a rock and a hard place’’ with no strong support for any one option for reform.

‘‘New Zealanders are resistant to change, including the prospect of increasing taxes to fund the inevitable increase in costs,’’ he said.

The report showed the public’s dominant preference was for the status quo to remain, and that the pension should be provided universally, without a means test.

The report said ‘‘more compelling evidence’’ was needed to show the costs of failure to reform.