Robin Hood Super

The Herald reports:

Keeping New Zealand Superannuation in its current form may mean more money is transferred from the working poor to the rich in the future, a researcher is warning.

Jenesa Jeram, a research fellow at think-tank the New Zealand Initiative, said the biggest surprise in undertaking research on New Zealand’s superannuation system was that it was affordable.

“The report has been a bit of a surprise. I went into it believing New Zealand Superannuation was not going to be affordable in the future.”

But she said just because New Zealand could afford it did not mean it was the best use of public money and warned that continuing to fund superannuation at the current rate may be at the expense of more needy groups.

“Our tax and welfare system is generally progressive: money is transferred from the rich to the poor.

“This could be reversed as the population ages and fewer people work, so that more money is transferred from the working poor to the relatively rich.”

And Labour refuses to raise the age of eligibility, which will mean more of a transfer from working poor to well off people.

Jeram said the age of eligibility should be linked to health expectancy – a measure for how long people live for without any major health complications.

She said health expectancy rather than life expectancy was a good measure to use because it indicated what age a person may be able to work until.

The health expectancy is currently 71.8 years for New Zealand women and just under 70 years for men.

Some have suggested having a different retirement age for men and women and for different ethnicities to match their health expectancy would make superannuation fairer.

But Jeram said it should be the same for everyone to fit with the universal system New Zealand has.

She said linking the pension to health expectancy would also give flexibility for future adjustments rather than a one off rise with a long lead in which was likely to be out of step with labour force trends by the time it comes into force.

Jeram said super should also be indexed to inflation growth rather than wages and inflation.

“Decoupling NZS from rises in wages is way of ensuring productivity gains reduce the costs of NZS.

“The real purchasing power of NZS should remain the same while the real purchasing power of wages would increase.”

I think they key change is linking NZS to inflation rather than wages. As the proportion of over 65s increases, it will become very expensive to have the status quo.