S loss of NZ Super
PENSIONS PAST
PUBLIC PENSIONS are largely the invention of the 19th and 20th centuries, with some tinkering in the 21st century.
David Preston’s 2008 Retirement Income in New Zealand: The Historical Context sets out the march to the universal New Zealand Superannuation pension, and then the cuts to make it more affordable. A 19th century: With very few old people in the early colonial era, a pension was not a national priority, but by the late 19th century the ‘‘problem of poor elderly people was growing’’, says Preston. In 1898 the Old Age Pension was created under prime minister Richard Seddon. It was means-tested, and only given to people of good character.
20th century: After World War One, the
By 2068, population forecasts suggest that instead of the roughly 14 per cent of the population aged 65 and over, it will be around 28 per cent.
That could mean around 1.1.7 million over the age of 65.
For them to save the future equivalent of $410,000 each would require them to save a combined $697 billion in assets they could live off.
To put that into perspective, it’s around $236 billion more than the current net financial wealth (excluding housing and land) of pensions focus was on disabled veterans. In the 1920s the idea of a universal state pension was first mooted. In 1938 the Social Security Act created a ‘‘two-tier’’ system with a meanstested Age Pension at age 60, and a small universal superannuation payment to those who did not qualify. This universal payment was to rise progressively to match the Age Pension, but didn’t do so until 1960. As late as 1972 the Age Benefit for a couple was 68 per cent of net ordinary time wages. A Late 1970s: In the early 1970s the real rates of the Age Pension and Universal Superannuation were lifted. By 1976 the Age Benefit for a couple was over 72 per cent of net ordinary time wages. In 1977 universal every household in New Zealand, according to the Reserve Bank’s Household Balance Sheet at the end of December.
Imagining a New Zealand with NZ Super stripped away entirely as the young expect is hard. It would certainly necessitate a lot of changes to the way people live.
Neilson said: ‘‘When I did some family history, and got access to census records, we were a bit like Italian families 30 years’ ago.’’
Three generations were living under the same roof, he said. That pattern would re-emerge, Neilson ‘‘National Superannuation’’ replaced the twotier system. It was generously set at 80 per cent of the average wage by 1978. A 1979- 2001: These were the years of cutting back NZ Super. By 2001 the age of eligibility had been lifted to 65, and the ‘‘floor’’ for NZ Super had been firmly established for a married couple at 65 per cent of the average net ordinary time wages. This floor was lifted in 2005 to 66 per cent as a result of a deal with New Zealand First. A 21st century: KiwiSaver was launched in 2007 with the intention of getting New Zealanders saving. Prime Minister John Key refuses to interfere with NZ Super, despite calls for the age of eligibility to rise to reflect people’s longer lives. believes. ‘‘Your children would be with you until they could afford separate accommodation, and your parents are with you because they can’t afford to live separately.’’
A society without NZ Super might also be a more conservative one.
In retirement people would probably take less risk in their investments, Neilson said, so they’d probably need larger nest eggs to live off. Eriksen wonders whether removing the guaranteed income of the older generation would remove a steady ‘‘keel’’ from the economy.
NZ Super is only just enough to scrape by on, provided you don’t run a car, he says. Every cent gets spent, recycling the money into the economy. Older people reliant on their savings for income would be subject to the interest rate cycle, which could well exacerbate swings in the country’s economic cycle.
And, he says, converting capital into sustainable income is a big call, and may require some Government guarantees.
‘‘As people get older, their faculties deteriorate, and they ability to manage finances disappears,’’ Eriksen said.
I hate Lotto, the odds are so much better on getting a WooHoo tax refund. And if there is no refund it hasn’t cost a thing. Great odds.