Pushing the retirement age to 67 by 2040 reshapes the debate in election year. The boomers will be happy, but what about the rest of us? Ben Thomas writes
It didn’t seem likely during the prime minister’s Monday morning interview circuit, after two studio interviews ended in mocking laughter from media hosts, but Bill English has ended his day with a minor political triumph.
The most significant mark on the career of his predecessor John Key was the refusal to change superannuation entitlements. What started off as a principled stance started to look over time more like a truculent refusal to deal with impending fiscal disaster. Even as Treasury predicted that superannuation costs would rise from 4.3% of GDP to 7.1% by 2040, Key’s only goal for that year was an aspirational predator-free New Zealand.
With his new finance minister Steven Joyce beside him, English announced this afternoon that by 2040 the age of New Zealand superannuation would rise from 65 to 67, with the changes being phased in from 2037. The upshot, he assured the voting classes, would be that anyone born before 1972 would still have the same entitlements as today.
So far so normal. It’s no surprise politicians have concluded the exact right time to turn off the spigot to the current retirement age is about the same time the biggest cohort of voters doesn’t need it any more. And a future government can always reintroduce stoats and rats if millennials need protein between the ages of 65 and 66.
But that shouldn’t diminish the significance of English’s announcement – which is not what he said, but that he said anything at all. By declaring even this modest proposal, the prime minister has reshaped the landscape with regard to retirement policy in an election year. He’s finally articulated what needed to be said – that superannuation is not sustainable at its current settings.
to our journalism!Find Out More
Immediately, the announcement brings superannuation into play as a campaign issue, but not in the way Winston Peters would have hoped for. Rather than galvanising Peters’ greying base, the prime minister’s “fair and reasonable approach” in his own words “gives people time”; that is, they have been assured by the largest party in parliament that they will get an essentially free ride.
The truth, though, is that the exact right time to turn off the aforementioned spigot is not 2037 but much earlier. Most young people are realistic about the state’s ability to fund their retirement. Many older people are not. And this announcement lights a fuse. The future of New Zealand super has always seemed murky, but far away. Now the clock is ticking. Some baby boomers have bristled at what they see as ageism or generational warfare when the cost of their retirement has been questioned. But now the future is clear: our parents get to retire earlier; the consolidated fund is being picked clean by the locust horde of boomers, leaving only bones when their children arrive at the current retirement age of 65, shortly after having paid off their student loans.
That’s if voters are inclined to accept the first offer made by English. The bidding starts now.
There is lots of detail to fine-tune: provision will have to be made for 65-year-old manual workers whose bodies can’t hold up. Māori still don’t live as long as non-Māori. The obvious answer is some kind of means test, so that independently wealthy people are not eligible for age-based welfare (bringing it into line with every other form of welfare payment in the country), while support is still available for those who genuinely need it. It’s an obvious solution that National and Labour have been terrified to talk about since the 1990s. Now that Bill has hauled superannuation into the spotlight, though, we will just have to wait and see.
The Spinoff politics section is made possible by Flick, the electricity retailer giving New Zealanders power over their power. With both spot price and fixed price plans available, you can be sure you’re getting true cost and real choice when you join Flick. Support us by making the switch today.