Flexi Super

UnitedFuture Leader Peter Dunne has announced:

UnitedFuture leader Peter Dunne has released a Government Discussion Paper on UnitedFuture’s flagship “Flexi Super” plan.

“Flexi Super gives New Zealanders the option of choosing to take a reduced rate of New Zealand superannuation from the age of 60, or an increased rate if they defer taking up superannuation until they reach 70.

“A Fairfax Ipsos Mori poll earlier this year showed almost 50% supported the idea – almost more than twice the level of support for shifting the age of entitlement for superannuation to 67, or keeping it at 65.

“Flexi Super lets people choose for themselves when they want to take up superannuation – without being told by the government when they should or should not retire,” Mr Dunne says.

Mr Dunne says Māori, Pasifika and other demographic groups with shorter life spans would benefit most from Flexi Super.

“The Discussion Paper is open for public submissions open until Friday 11 October, after which time the Government will consider these and determine what action it will take,” he says.

The Flexi Super Discussion Paper was a provision of the National/UnitedFuture Confidence and Supply Agreement.

Stuff reports:

Exactly how much more or less than the current rate of NZ Super they would get has not been calculated.

Examples given yesterday suggested a 6 per cent discount for every year the pension was drawn early, or 10 per cent extra for every year it was delayed.

The Treasury discussion document warned the final figures could be “much different” and would depend on detailed analysis which has not taken place.

The treatment of SuperGold cards would be unchanged, no matter when the pension was drawn.

I’m supportive of the principle. The challenge is how to do this is a cost neutral way. Individuals will know reasonably well their likely life expectancy based on their health. So those with bad health will take a reduced Super at 60 and those with good health a higher Super at 70 and the overall cost may end up higher for the taxpayer.

Labour finance spokesman David Parker said the party would consider the policy.

But he warned it had “fishhooks”.

Because many of those with shorter life expectancies would take the money early, Treasury would have to pay a much lower rate at age 60 if the scheme was not to add extra cost.

But Mr Parker warned that some workers would be tempted to take the money early because of difficult financial circumstances – even if that meant they ended up with less money for much longer.

“Some people, because of their economic circumstances might be pressured to take their pension early, despite the fact that doing so could mean they live in poverty as they age.”

I’m not sure you protect people from their own choices. And I would presume that the level of NZ Super, even if taken early at 60, would still remain higher than being on another form of welfare benefit.

The discussion document is here. The example given is that if you took NZ Super at 61 you would get $279.06 a week but if you held off until 69 it would be $523.30 a week. I’d be holding off!

The document also lists other countries that have similar policies such as Australia, Canada, France, Germany, Ireland, Japan, Netherlands, Sweden, UK and USA.