Labour’s savings policy

3 News have just announced that Labour have done a massive u-turn on the age of eligibility for superannuation. After 15 years of scare-mongering and saying National will put up the age (which led Key to rule it out so definitively), they are saying if elected they will increase the age of eligibility from 65 to 67, starting in 2020 and ending in 2033 with an increase of two months a year.

I personally warmly welcome the policy. The current age is not sustainable in the long term. This policy gives Labour greater credibility on economic issues, even though I suspect their motivation is more trying to force the PM into breaking a promise than a real belief in raising the age. But regardless of motivation, it is a good policy and congratulations to Labour for putting the issue back on the table. We should be debating not just the retirement age but the whole design of our public superannuation scheme. This is the first step towards being able to have that debate.

There will be some opposition – the unions traditionally have been very opposed to an age increase as manual workers are less able to keep working until 67. Also Maori groups are normally opposed as the average life expectancy for a Male Maori is just 70, which means the numbers of years they would receive superannuation is reduced by 40%.

The biggest challenge Labour may have, is their coalition partners. There is no way Labour will form Government alone. The Greens might sign up to such a policy, but one can only assume Winston will fight it with all his might. Is this a case of Labour promising it, knowing they won’t have to implement it? Would they have made this policy pledge if they were at 40%?

The challenge now for National is to respond to the policy. The PM unwisely ruled out any change to the entitlement age not just in his first term of office, but for his duration as PM, so it doesn’t leave them a lot of room to respond. If they maintain that there is no need to raise the age, then Labour will gain in the economic credibility stakes – not necessarily enough to overcome all their other negatives, but any gain will be welcome for Labour.

As a fiscal conservative, I welcome Labour’s policy on the retirement age. I’ll cover the other aspects once they are released.