NZ First Superannuation Bill: where is the problem?

Last week New Zealand parliament voted down a New Zealand First sponsored superannuation bill that sought to radically clip pension entitlements of New Zealand’s current and future immigrants. The bill, introduced by Denis O'Rourke, proposed a pro rata entitlement based on the length of time a person had lived in New Zealand between the ages of 20 and 65 years. It sought to allow full pension to those who had spent less than five years living outside New Zealand between 20 and 65. This is opposed to the existing provision, where all New Zealand residents who have lived in the country for at least 10 years after the age of 20 and at least five years after the age of 50, are entitled for pension benefit. The bill witnessed a fiery debate in the parliament.

Audrey Young, New Zealand Herald’s political editor, notes that National attacked New Zealand First as "bigoted" and "racist" for bringing the bill to the House. Whereas Labour sought to rebut this with their allegation that the Nationals have failed to comprehend the gravity of “affordability” issue and continues to evade a genuine discussion with the New Zealand public.

The nature of discussion around the proposed bill remained political, rather than making pure economic sense. While New Zealand First attempted to advance their social conservative agenda through this bill, Labour demonstrated their often habitual ad-hoc approach towards issues of national importance. Nationals continued to claim moral high grounds on pretext of impeding an otherwise socially conservative agenda. Either way, an opportunity was lost by both, government and opposition, to kick start a long felt need, for an open and interactive public debate, on New Zealand's superannuation scheme.

The budget 2015–16 has allocated $12.2 billion for New Zealand Superannuation payments—an increase of 12 per cent from previous two years, amounting to 16 per cent of core crown revenue.

According to some projections the number of retirees will rise to 1.1 million by 2031 with accompanying pension costs projected to surge to $20 billion a year. We spend around $4.3 billion on other core benefits such as $1.7 billion in Jobseeker Support and emergency benefits, $1.2 billion in sole parent support, and $1.4 billion in supported living payments. The simple mathematics of these statistical figures is enough to persuade experts, and New Zealand public, to ask government about its proposed plan of action to maintain future sustainability of superannuation fund.

New Zealand currently boasts of a world class policy of retirement and superannuation scheme. Associate Professor Susan St John, co-director of the Retirement Policy Research Centre at the University of Auckland Business School, points important contributing factors. New Zealand has probably the simplest retirement system in the developed world. Second is the universal, just, and equitable appeal of the superannuation system. It is simple, fair, not tied to paid work and indexed to wages. It is good for women, and in a sense, does not deters supplementation through paid work and helps keep the poverty rates low for the over 65s.

Denis O'Rourke's suggestion that in last 15 years, New Zealand have roughly 79,000 immigrants over 50 years of age, holds less ground against the figure suggested by census 2013 data, which reports that 607,035 people aged 65 years and over are usually resident in New Zealand (and receive pension). These numbers, by no means, appear to be humongous, suggesting a knee jerk political reaction. Kiwi migrants continue to bring vital skill-set and much-needed human resource, which contributes in effective functioning of our larger economy, of which superannuation is just a part.

There are many other visible areas of concern within current superannuation scheme that needs smart legislative attention. The fact that pension is neither asset-tested—as one can have unlimited assets and receive the pension, nor is it income-tested—as one can have unlimited income and qualify for the benefit, is one such area. A worker does not need to be 'retired' and can have a full-time job and still collect the full pension. In this regard a moderate tempering or rationalising of such provisions would ensure preserving both, equitability and sustainability of current superannuation scheme. There is a need for enunciating a wider public debate, rather than just a populist debate, as witnessed during the falling of this recent bill in the parliament.