Superannuation Policy: Dunne unveils radical 60 to 70 choice on superannuation; compulsory KiwiSaver
21 July 2011
New Zealanders should be able to take superannuation at reduced rates down to 60 or increasingly enhanced rates if they hold off until between 66 and 70, alongside making KiwiSaver compulsory, UnitedFuture leader Peter Dunne said today.
“Kiwis would then be able to manage their retirement age and lifestyle – choices they currently do not have – and it would be cost neutral with the current scheme,” Mr Dunne said in launching the party’s superannuation policy.
“Each year below 65 that superannuation would be claimed down to 60, would see a small reduction, and each year over 65 up to 70, it would be enhanced.
Mr Dunne said the figures used would make it cost-neutral with the superannuation scheme as it stands, with the long term sustainability issue addressed by having compulsory KiwiSaver.
“The sustainability arguments around superannuation, and whether it should be 65 or 67, then become redundant,” he said.
“People can then do their own maths and work out what works best for them based on their lifestyle and aspirations,” Mr Dunne said.
He said on current superannuation levels, a couple who get $522 a week today when they turn 65 could choose to wait to 70 and get $840 a week. Equally if they instead chose to wait just two years and get super at 67, they would get $630 a week.
“If they decide to retire earlier than 65, then they would receive a lesser amount for each year until the age of 60.
“Similarly, a single person could still collect the current $339 per week, or on today’s figures get $410 if they waited to 67 or $546 at 70.
“It is very simple. Our policy recognises that today people work and stay active for longer – and it is sustainable for New Zealand in the long term when connected to compulsory KiwiSaver, which frankly we need to do as a nation at some point,” Mr Dunne said.
“Kiwis will have a working, sustainable and secured retirement future and that is what we need to be working towards.
“In the meantime, what we propose gives them choice about how they want to shape their lives in retirement and when they want to begin,” Mr Dunne said.
Other key components of UnitedFuture’s superannuation policy include:
- Amending the superannuation formulation so it is calculated on the forecast changes to the consumer price index and average wage increase for the following 12 months. (Currently adjustments are made after the event, creating a time lag that cheats superannuitants of their full entitlement. Any unforeseen changes to inflation or wages would be adjusted each April, in favour of superannuitants.)
- Exempting those who have themselves contributed to overseas pension schemes from the provisions of Section 70 of the Social Security Act, which currently deducts the amount of their overseas pension from their NZ Superannuation entitlement, thereby penalising them for having provided for their own retirement. Section 70 should only apply where an overseas pension has been fully funded from general tax revenues. (This policy change would currently allow about 52,000 superannuitants to reap the benefit of responsible planning for their retirement.)
NOTE: All figures are based off the current superannuation rate, and would increase proportionately as superannuation is adjusted for changes in the CPI and average wage..
In a nutshell:
Questions and Answers:
What is the current cost of superannuation to the country and what are the future projected costs?
Treasury, in the Budget Economic and Fiscal Update 2011, forecasts the expense of NZ Super in 2011 to be $8,833,000,000. In 2010, it was $8,290,000,000.
In the same document, Treasury forecasted the expense of New Zealand Superannuation in 2015 to be $11,666,000,000.
While there are no official forecasts beyond 2015, Treasury projections are:
How sustainable is UnitedFuture’s superannuation policy?
The changes would be cost-neutral for government at whatever level of uptake at any age from 60 to 70.
Individuals will be free to choose what works best for them. If neither earlier nor later retirement suits them, they could stick to the current retirement age of 65 at the current level of superannuation. It is all about choice that is not there today.
Is it anticipated that larger number of people would take super earlier than 65, or move it out further, and why?
We have not anticipated either, nor do we intend to. It would be entirely up to individuals, based on their circumstances, to decide what works best for them. The formula is cost neutral to government on the current costs of superannuation.
If people are happy to work beyond 65, they would have the opportunity to delay their superannuation and receive a higher level when they do claim it up to the age of 70.
People choosing to retire earlier than 65 would receive a lesser rate of superannuation to reflect that they will potentially be drawing it for longer.
The two underlying principles of this policy are choice and cost neutrality. We want to provide people with increased flexibility around when they retire, without leaving them or government, out-of-pocket.
Anecdotal feedback suggest that more and more people still feel capable and motivated to work beyond 65 and many do that now.
Give people the option of choosing to receive New Zealand Superannuation at a reduced rate from the age of 60, or at an enhanced rate from the age of 70, if they delay uptake till that time.
What it means in dollar terms based on today’s superannuation:
60 = $248.79
61 = $264.68
62 = $281.57
63 = $299.54
64 = $318.66
65 = $339 per week (current rate)
66 = $372.90
67 = $410.19
68 = $451.21
69 = $496.33
70 = $545.96
60 = $383.11
61 = $407.56
62 = $433.57
63 = $461.24
64 = $490.98
65 = $522 per week (current rate)
66 = $574.20
67 = $631.62
68 = $694.78
69 = $764.26
70 = $840.69
Why do UnitedFuture policies count?
Because UnitedFuture and its leader Peter Dunne have an undeniable history of delivering from the Government benches, year in year out.
UnitedFuture has delivered New Zealanders the:
And in this term alone: