The Dim-Post

May 12, 2014

Probably worth it

Filed under: Politics — danylmc @ 8:32 am

Via Stuff:

Tens of thousands of well-off pensioners are claiming up to half a billion dollars in superannuation every year.

With government debt at more than $60 billion, critics say the wealthy are asking their children and grandchildren to fund their so-called retirement.

Ministry of Social Development figures revealed more than 26,000 people with total income of more than $70,000 a year claimed superannuation last year. At current rates, this could add up to $570m a year before tax..

These figures, released under the Official Information Act, come as the country wrestles with how to pay for our growing retirement-age population and looked increasingly isolated in offering universal super.

A spokesman for Finance Minister Bill English said the Government would make no changes to national superannuation.

He declined to comment on the fairness of funding superannuation for the wealthy. “It is affordable under current settings.”

Green Party MP Jan Logie said introducing means-testing for the wealthy could end up hurting the poor and Labour Party spokesman David Parker said his party would not consider policies to claw back super from the wealthy.

There’s a reason left-wing political parties are moving towards universality or very high income levels for state welfare, despite the fiscal insanity of such policies. Universality protects a policy politically. If superannuation payments only went to poorer New Zealanders then Paula Bennett would quickly set about trying to ‘help’ those retired recipients because she cares about them so much and they’d be mandatorily working part-time at supermarkets while being investigated for welfare fraud, or going down to the WINZ office every six weeks with a copy of their birth certificate to reprove eligibility and having their payments cut off if they didn’t comply, or, randomly, even if they did. The idiocy of paying welfare to retired millionaires is probably worth the horrible bullshit National would inflict on poor retirees if the millionaires didn’t get it.

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35 Comments »

  1. it’s not compulsory to claim it.

    Comment by northshoreguynz — May 12, 2014 @ 8:37 am

  2. I doubt even a conservative govt would make as a condition for receiving a retirement benefit the willingness to work.

    Means testing is the issue and it’s more likely both National and Labour recognize that’s a bit of a minefield.

    But if that’s what you think National would do its hard to see why they haven’t and say they won’t.

    Comment by NeilM — May 12, 2014 @ 8:50 am

  3. Come to think of it, Labour’s policy does move away from simple inversality.

    They plan to raise the retirement age and then allow some to retire earlier based on such cicumstances as having worked in physically demanding jobs. Which would mean having system of entitlement checking you say National really want.

    Comment by NeilM — May 12, 2014 @ 8:57 am

  4. Definitely a vote loser. Higher income or not, I expect if you’re in that position then your view would tend to be that you’ve been paying substantial taxes all your life on the understanding that the government was putting some of it away on your behalf to pay back to you after reaching a certain age. This very possibly would have affected how much people planned to save on their own initiative towards the lifestyle they wanted to maintain.

    Comment by izogi — May 12, 2014 @ 9:15 am

  5. Northshoreguy:it’s not compulsory to claim it.
    Good point. So where is the shame and guilt that the Bennetts of this world heap on beneficiaries? Surely there should be some shame left for those over 65years who earn over $100k per annum? Shame on you bludgers who are rich and milking the taxpayers of our hard earned dollars. Repent I say!

    Comment by xianmac — May 12, 2014 @ 9:37 am

  6. xianmac , they damn sure better not express concern over the state of the nation’s books.

    Comment by Alex Coleman — May 12, 2014 @ 9:40 am

  7. I think means testing super would be a disaster. We already have enough trouble encouraging people to save for their retirement. Any kind of means testing – even if set at a very high threshold – would make people fear they will be penalised for being careful and saving. Hell, even this news story will cause some savers to think twice, and maybe they would be better off joining the grasshoppers rather than being a sensible ant.

    Comment by James Jones — May 12, 2014 @ 9:41 am

  8. …your view would tend to be that you’ve been paying substantial taxes all your life on the understanding that the government was putting some of it away on your behalf to pay back to you after reaching a certain age.

    Exactly this. Also, very few people know when they are young that they are likely to be old and loaded, so it makes sense if that we’re all expected to pay, we should all expect to benefit to some degree or other.

    However, I do get pretty pissed off that raising the age of entitlement seems to be sacrosanct. By and large, people are living longer, healthier lives. The super entitlement age should reflect this change, particularly given that somehow the State will need to offset skyrocketing health costs as we all linger on for decades.

    Comment by Gregor W — May 12, 2014 @ 9:45 am

  9. @Alex, since when has self awareness been a meme for this generation? (Is that the right use of meme? I get confused)

    Comment by northshoreguynz — May 12, 2014 @ 9:46 am

  10. A simple mechanism would be to tax the amount of the super back on incomes above a certain level.

    Comment by Antipodeane — May 12, 2014 @ 9:47 am

  11. People forget the first Bolger Govt introduced income testing on the elderly and became almost a lame dog for its next two term. Winston saw the gap and created a whole new pressure group of elderly and then a party under MMP which is still a major force today.

    People also forget that whilst the elderly die they are replaced by ever more people proportionately because the young no longer breed in sufficient numbers to counter ageist policies or the more conservative that flows from the aging.

    A few years ago we had the year of the volunteer, as part of that we learned just how big the input was of the elderly and Maori.. they are extremely useful and important to society because of their spare time (and often their money), so the challenge of younger generations is to use the elder’s increasing fitness and longevity to encourage more volunteering.

    Bolger tried to rein in Super on a much smaller, poorer and less well educated cohort nearly a quarter of a century ago and got handed his beans.. good luck trying it again now.

    JC

    Comment by JC — May 12, 2014 @ 9:59 am

  12. you’ve been paying substantial taxes all your life on the understanding that the government was putting some of it away on your behalf to pay back to you after reaching a certain age.

    The government has started doing that, but it won’t be drawn on for a long time. For the last 40 years superannuation has been a social welfare benefit paid out of current taxation. If you’re a wealthy retiree who’s spent his adult life paying accountants to see to it that you avoided paying taxes and are now claiming superannuation despite having a good income, don’t bother giving us any of that Atlas Shrugged bullshit – unlike you, the welfare beneficiaries Paula Bennett is going after do actually need the money.

    Comment by Psycho Milt — May 12, 2014 @ 10:08 am

  13. NeilM #3: You can also add airline pilots and air traffic controllers, who are required by law to retire early on OSH grounds.

    Comment by DeepRed (@DeepRed6502) — May 12, 2014 @ 10:24 am

  14. Means testing super based on savings is a terrible idea, because it penalises saving. Means testing it based on current earnings is probably okay. The worst thing that could happen is fewer older people in the workforce, which a lot of the time would mean jobs opening up for younger people. In some cases the loss of elderly workers with decades of experience who are still at the top of their game would be a bad thing, but such people tend to enjoy their work and would presumably stay on even if the financial incentive was smaller. Also they tend to be paid quite a bit, so wouldn’t give up a high salary just so they could get a much smaller amount of free money.

    Comment by helenalex — May 12, 2014 @ 10:54 am

  15. Means testing super based on savings is a terrible idea, because it penalises saving. Means testing it based on current earnings is probably okay.

    Are you including income from interest earned on savings and investments? Either way, you’re still penalising savers.

    you’ve been paying substantial taxes all your life on the understanding that the government was putting some of it away on your behalf to pay back to you after reaching a certain age.
    I’m paying taxes to support my parents and grand parents in their retirement now. The idea that the government is putting some of this money away for me, for later, is laughable (I’m in my early 30’s).

    Comment by Phil — May 12, 2014 @ 12:10 pm

  16. Danyl: “There’s a reason left-wing political parties are moving towards universality…”
    Universality has long been a key feature of New Zealand’s provision for the older population. One of the attractions of universality is that it is relatively cheap to administer, not requiring a vast bureaucracy.

    Antipodeane: “A simple mechanism would be to tax the amount of the super back on incomes above a certain level.”
    NZ Superannuation is already subject to tax.

    http://www.ird.govt.nz/how-to/taxrates-codes/workout/dtree-taxcode-benefit-q1.html

    Comment by Kay — May 12, 2014 @ 12:16 pm

  17. The idea that the government is putting some of this money away for me, for later, is laughable (I’m in my early 30′s).

    It’s not laughable for most people I suspect.
    After all, this is pretty much the pitch for Kiwisaver.

    Comment by Gregor W — May 12, 2014 @ 12:18 pm

  18. Means testing super based on savings is a terrible idea, because it penalises saving.

    It also penalises working.

    If someone is 67, and still in the workforce, and earning $900 per week, they’re contributing to the economy and society. They’re also paying about $200 per week in income taxes, and another $60-100 in consumption taxes (depending on their spending level), offsetting dramatically the $280-$360 they’re being paid.

    That person will also experience better health and social outcomes.

    Comment by George — May 12, 2014 @ 12:18 pm

  19. Gregor, Kiwisaver is not the same as government superannuation.

    I don’t know of anyone under the age of 35 who thinks that, in 30+ years time, the generosity of the current scheme will be available to them.

    Comment by Phil — May 12, 2014 @ 12:36 pm

  20. If the top tax rate is increased then a fair bit of those pensions would be taxed back. We had the sur-tax previously – but that proved to be politically unsustainable (and unfair on pensioners). All income in the higher brackets needs to be taxed more as does capital gains.

    Comment by Len — May 12, 2014 @ 12:36 pm

  21. Here’s a succinct history of New Zealand’s system:

    http://www.goodreturns.co.nz/article/976486047/super-history-nz-s-super-system-unique.html

    Comment by Kay — May 12, 2014 @ 12:53 pm

  22. “I don’t know of anyone under the age of 35 who thinks that, in 30+ years time, the generosity of the current scheme will be available to them.”

    I’m hitting 50 and I don’t think the current scheme will be available to me… and this is the bind. Who knows what to do – how much to save v paying down debt, how much will be needed for retirement v helping your kids get established? Or even if you will live long enough to get the pension, given the age of eligibility will inevitably rise? Both my parents died at 70 – will I outlive them?

    So how do I plan? What do I do?

    I also doubt my kiwisaver will amount to anything. The time frame is too long at 30+ years – how many financial institutions fold in that time? Are ripped off by some unscrupulous employee? Fail during an economic downturn? I remember my parent’s generation investing in this thing called “mutual funds” which did pay out – but only at a fraction of what was promised during the sales pitches twenty years earlier.

    While John Key’s refusal to entertain a rise in the eligibility age is reckless from one perspective, I can see his point – there is something to be said for certainty. The system needs to be broadly agreed to and then not changed. If it is subject to continual change people can’t plan.

    Also, as a country we can afford anything we want – we just need to understand the trade-offs.

    Comment by MeToo — May 12, 2014 @ 12:53 pm

  23. Universalism only makes sense when taxation is steeply progressive.

    Comment by B — May 12, 2014 @ 1:04 pm

  24. Gregor, Kiwisaver is not the same as government superannuation.

    I’m not suggesting it is.
    What I am saying is that I think you credit the average person with a bit much financial discernment by suggesting that many people think as you do (i.e. that taxation today for some future payoff is a laughable notion).

    “I don’t know of anyone under the age of 35 who thinks that

    As above, this probably says more about your friends and acquaintances than it does about the average punter (though I am just guessing).

    Comment by Gregor W — May 12, 2014 @ 1:19 pm

  25. All the goods and services retirees consume have to be produced by the working population

    That’s true if they pay for them out of National Super funded from current taxation.
    It’s true if there’s a full Super Fund
    It’s true if they pay for them out of Kiwisaver or other savings accounts
    And it’s even true if they pay for them by selling down their property holdings

    The only difference is the level of fairness between rich and poor retirees [and rich/poor workers], and actually, despite any whining about the rich getting benefits, a single flat rate National Super scheme offers the most equal outcome out of all the above.

    Comment by richdrich — May 12, 2014 @ 1:23 pm

  26. Personally I like Morgan’s Big Kahuna: Drop the age of super to 18, becoming a universal income for all. Flatten the tax rate (at a higher level than current) to account for the extra losses. Well balanced most folk will be just as well off as they are now, but you’ve lost all the silly marginal tax rate nonsense, and you’re incentivising any and all work. It’ll likely be slightly lower than current super, so you’ll need to clearly signal that additional savings are required: again, anything you earn (less tax) is yours to keep on top. It includes additional taxation on capital, essentially to ensure that capital is being productive.

    Comment by lefty — May 12, 2014 @ 7:29 pm

  27. So shitty policies of the left are defensible because of nameless things the others guy might do. For which there is no evidence.

    I think we can all agree this and other recent post show Danyl has sunk to the level of a tribal partisan. The only question is – is it only for election year?

    Comment by Swan — May 12, 2014 @ 9:30 pm

  28. It also penalises working.

    Not really. Workers still get paid in addition to getting super. So what if they pay more pay tax or their super is reduced…they are still better off than if they were not working. Besides, thousands of older people work in the voluntary sector. Working isn’t all about money.

    Comment by Ross — May 12, 2014 @ 9:53 pm

  29. I don’t know of anyone under the age of 35 who thinks that, in 30+ years time, the generosity of the current scheme will be available to them.

    My parents said the same thing 30+ years ago.

    Comment by Ross — May 12, 2014 @ 9:55 pm

  30. I’m hitting 50 and I don’t think the current scheme will be available to me

    The age of eligibility might rise to 67 or 68 years of age, but otherwise I’d be surprised if the current scheme changes when you retire.

    Comment by Ross — May 12, 2014 @ 10:00 pm

  31. I don’t know of anyone under the age of 35 who thinks that, in 30+ years time, the generosity of the current scheme will be available to them.
    My parents said the same thing 30+ years ago.

    The mix of political-pessimism and demographic-inevitability that contribute to my view is moving further and further toward the latter.

    I think you credit the average person with a bit much financial discernment by suggesting that many people think as you do (i.e. that taxation today for some future payoff is a laughable notion).

    I would put it this way; most people seem to have a broad understanding that their kiwisaver account belongs to them specifically, and form part of their own future retirement income.
    They also have a broad understanding that the tax paid today supports the elderly today, and in future it will still be the case that their children and grandchildren’s tax supports them in turn.

    Comment by Phil — May 13, 2014 @ 11:17 am

  32. lefty @ 26. I too see merit in the Big Kahuna idea. I’ve seen many examples of beneficiaries being offred short term work through mates’ employers, but the risk of taking up the offer leaves them confused as to their on-going entitlement to their benefit. So rather than risk their benefit, they turn down the work.
    Imagine how easy tax administration will be with a flat tax; you take a team of people on for three days of intensive work of moving offices. They don’t all supply you with their IRD number, but it doesn’t matter, because everyone pays PAYE at the rate of 24/25/28/30/33% whatever the flat rate is. (IRD numbers would be needed for Kiwisaver contributions, esp if compulsory).

    Danyl, you’re probably on a salary of at least $70k. Will you take up National Super and continue to work if you were turning 65..?

    Tax on $70k = $14,020.
    After tax NatSup (single) is $14,641.
    After tax NatSup (married) is $11,122

    Comment by Clunking Fist — May 13, 2014 @ 1:57 pm

  33. Expecting “rich” oldies not to take up NatSuper is like expecting Green MPs not to take up parliamentary air travel benefits….

    Comment by Clunking Fist — May 13, 2014 @ 1:59 pm

  34. Not a problem if we had appropriate progressive taxation. So that the millionaires had truly paid enough to cover it during their working or earning lives.

    It is only a problem because of unaffordable tax cuts.

    Comment by KJT — May 27, 2014 @ 10:06 am

  35. Yes, that is exactly the answer; instead of running round and round and round mulberry bushes about unnecessary and potentially very damaging problems and then “solutions”.

    When the way out is through the door, take it; why do so few do this? – Chinese proverb

    Comment by Antipodeane — May 27, 2014 @ 11:23 am


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