Changes to the Superannuation age : thoughts?

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Forums › Finance and wealth management › Changes to the Superannuation age : thoughts?

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#1732557 7-Mar-2017 15:05

Lias:

Yes. The age of retirement should only be 5-10 years below the average life expectancy.

I just plain disagree with this.

So if the average life expediency is 86 for men, you would be happy with men not being eligible for super until they are 81?

EDIT: Out of interest @Lias, can I ask how old you are? Cards on the table, I am 39.

tdgeek

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#1732558 7-Mar-2017 15:06

mattwnz:
tdgeek:

afe66: Let's be honest, either get rid of any asset stripping for rest home costs or stop the farce of hiding all the assets in "trusts".

My parents and all their baby boomer friends have done this but they all talk about "their houses, batches"

A.

What were interest rates like back in the baby boomer days? High teens for a house. And I imagine many younger non baby boomers will work hard to set themselves up as freehold home owners as well. Will that be baby boomer 2.0?

Interest rates being higher wasn't a bad thing, as it meant that houses were cheaper. Eg people couldn't afford to borrow as much due to the high rates. Houses today are still affordable, due to the low interest rates, but the amount to buy them is 8-10 times the household wage in many areas, which is madness. You also need to remember that many households only had a single wage earned back in the 70s. So in many ways the baby boomer generation had it easier.

Not sure what the current super amount is. But roughly if it is 18k a year, then that is potentially a loss of 36k, or 50k of earnings before tax, that people will have to earn extra to make up the loss under this move. Even though the tax we pay today is paying people's current super.

Baby boomers saved for a deposit, yes that was lower than today as comparison to wages. Intereste rates are a big part of early mortgage payments, and they were 4X higher. Go back further, every family had one wage earner, wife at homne, yet they can build new houses off that. The circumstances of the day decree how the populous can run their lives, but the baby boomers get treated like a pack of hungry wolves. Its not the people, its that time

sbiddle

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#1732560 7-Mar-2017 15:07

The problem is people are unwilling to accept that a fully state funded pension simply isn't possible with an ageing population. You either need to raise the age or make superannuation mandatory with significant government incentives.

The who topic is an unpopular one because nobody wants to make the tough decisions. Labour pledged it for the last 2 elections, but now that National are for it Little has changed his mind. Winston on the other hand is scaremongering probably telling 80 year olds that they're going to get their super cut.

Nobody is forcing people to work until they're 67, and Kiwisaver will be available from 65.

mattwnz

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#1732561 7-Mar-2017 15:08

Paul1977:

Lias:

You might want to check your facts there.

The first pension was introduced in 1898 as the "Old-age Pensions Act" , and the age was 65. It wasn't until the Social Security Act of 1938 that the age was lowered to 60.

Also it's not my birthday?

Oh, I misread. I read the end of your sentence in your previous posts as "that's coming from someone who's turning 65 today".

Fair enough, I didn't fact-check enough. But your initial statement "We've had a pension at age 65 since 1898 when the average male life expectancy was 55" implies that the pension age hasn't changed in the last 119 years.

With increased prosperity, you would expect a country to be able to drop their age of super entitlement. Apparently the problem here is the babybookers. But by the time this comes in, a lot of that generation will have already died, so I am not sure of the intention of this, except it is basically taking the problem off the table for the future so it isn't an election issue. Whether that is a good or bad move will show int eh polls. But Labour are obviously now trying to appeal to the Gen X&Y with their new DL, and how these generations are picking up all the costs for their education, super, increased housing cost, and likely health too in the future.

Pumpedd

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#1732563 7-Mar-2017 15:10

He wont get it through Parliament so no idea why he brought it up now. United are against it..Maori's are against it. Wont happen under MMP.

evilengineer

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#1732565 7-Mar-2017 15:12

tdgeek:

What were interest rates like back in the baby boomer days? High teens for a house. And I imagine many younger non baby boomers will work hard to set themselves up as freehold home owners as well. Will that be baby boomer 2.0?

And what was the average house price/income multiple back then? 2.5 to 3?

And what is it now? 8+?

Plus five years worth of 10% 1970s/80s style inflation with pay rises of a similar amount would soon make those eye watering early payments much more manageable.

That's not going to happen these days with your 2% (if your lucky) pay rises. Crippled for years!

Once again, the boomers haven't had it so bad. :-)

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mattwnz

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#1732577 7-Mar-2017 15:15

sbiddle:

The problem is people are unwilling to accept that a fully state funded pension simply isn't possible with an ageing population. You either need to raise the age or make superannuation mandatory with significant government incentives.

The who topic is an unpopular one because nobody wants to make the tough decisions. Labour pledged it for the last 2 elections, but now that National are for it Little has changed his mind. Winston on the other hand is scaremongering probably telling 80 year olds that they're going to get their super cut.

But are their actual numbers to prove that? If it is due to the bubble of baby boomers, most of those will have likely died by the time this change fully comes in anyway. So the costs by then should have gone down.National have always previously stated that it was fully affordable, but have changed the policy due their understanding that 'the pubic' wanted it to increase. We already have some of the lowest cost systems in the world.

Winston isn't scare mongering, he predicated this years ago, that National would do this, once Key stood down. He also wouldn't be telling people their super will be cut, or do you have a source for that?

If NZ was making more earnings, and everyone was paying their fair share of tax and fixing tax holes, then this change shouldn't be needed.

sxz

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#1732580 7-Mar-2017 15:16

Agree to raising it to 67 years (at least).

Disagree with waiting 20 years to do it. Wimp. He knows it needs to be done, but doesn't want to upset core voters.

I think the Pension should be partially (or fully) means tested. It's a benefit, pure and simple, and should be treated as such. My grandparents don't need or use the full $500 odd each a week they have been receiving for 23 years each. I think that if someone needs help - absolutely help them and allow them to live in dignity. If they don't need help, help them less (or not at all). We apply this attitude to students, families with young kids, new mothers, and the elderly who are incapable, why not apply this to retired people generally?

mattwnz

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#1732582 7-Mar-2017 15:17

evilengineer:

tdgeek:

What were interest rates like back in the baby boomer days? High teens for a house. And I imagine many younger non baby boomers will work hard to set themselves up as freehold home owners as well. Will that be baby boomer 2.0?

And what was the average house price/income multiple back then? 2.5 to 3?

And what is it now? 8+?

Plus five years worth of 10% 1970s/80s style inflation with pay rises of a similar amount would soon make those eye watering early payments much more manageable.

That's not going to happen these days with your 2% (if your lucky) pay rises. Crippled for years!

Once again, the boomers haven't had it so bad. :-)

The question is what do people want? Million dollar houses with an interest rate of 3-4%. Or a $300k house with an interest rate of 15-20%. I know which one I would prefer, and it won't be the million dollar house.

Paul1977

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#1732588 7-Mar-2017 15:26

mattwnz:

The question is what do people want? Million dollar houses with an interest rate of 3-4%. Or a $300k house with an interest rate of 15-20%. I know which one I would prefer, and it won't be the million dollar house.

Actually, $1,000,000 at 4% over 30 years has a lower fortnightly repayment than $300,000 at 20% over 30 years.

EDIT: Although as @evilengineer said, if the high interest rate was accompanied by high inflation (and high yearly income increases) then the fortnightly payment as a percentage of income would dropped significantly faster.

afe66

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#1732595 7-Mar-2017 15:35

tdgeek:
afe66: Let's be honest, either get rid of any asset stripping for rest home costs or stop the farce of hiding all the assets in "trusts".

My parents and all their baby boomer friends have done this but they all talk about "their houses, batches"

A.

What were interest rates like back in the baby boomer days? High teens for a house. And I imagine many younger non baby boomers will work hard to set themselves up as freehold home owners as well. Will that be baby boomer 2.0?

My point isn't about how hard things were in the past. Lots of things were harder in the past but some were easier too. I loved the 20% interest on my term deposit from fruit picking at school in 1986!!!

I'm just calling for real world honesty here. Currently we expect people with assets to contribute to costs of their rest home care but make it too easy to hide from this by placing assets in farcical trusts.

So it you have 50k you will have to play but if your millions are hidden in trusts, you don't.

I'm just calling for end of asset stripping for all or get tougher of trusts that are effectively just tax avoidance strategies.(or my preference an inheritance tax)

A.

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robcreid

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#1732597 7-Mar-2017 15:38

mattwnz:

With increased prosperity, you would expect a country to be able to drop their age of super entitlement. Apparently the problem here is the babybookers. But by the time this comes in, a lot of that generation will have already died, so I am not sure of the intention of this, except it is basically taking the problem off the table for the future so it isn't an election issue.

According to this Stats NZ page the baby boomers are around the 50 - 70 mark. You can see the bulges in the graph around the 45 to 55 age mark. Some of them will be dead in 20 years but because there is so many of them and they are on average living longer they will be claiming super for longer with relatively less people on the tax-payer age groups to pay for it.

It looks like the majority of the bulges will already be getting super when this change comes in 20 years which makes it seem a bit like closing the door after the oldys are already out to pasture.

Geektastic

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#1732600 7-Mar-2017 15:42

It's always interesting to hear other people's experiences. I remember being amazed at how many old people worked here compared to the UK. There,you were fairly much compulsorily retired at 65 in many firms.

mattwnz

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#1732601 7-Mar-2017 15:45

Paul1977:

mattwnz:

The question is what do people want? Million dollar houses with an interest rate of 3-4%. Or a $300k house with an interest rate of 15-20%. I know which one I would prefer, and it won't be the million dollar house.

Actually, $1,000,000 at 4% over 30 years has a lower fortnightly repayment than $300,000 at 20% over 30 years.

EDIT: Although as @evilengineer said, if the high interest rate was accompanied by high inflation (and high yearly income increases) then the fortnightly payment as a percentage of income would dropped significantly faster.

I didn't work out the exact numbers, but just giving the idea that a lower interest rate pushes up the prices. A lack of supply fuels this, but the interest rates put a cap on what people can afford to pay. This is partly why house prices in Auckland have stall, because interest rates are now starting to rise, and people have reached the top end of affordability levels. Hopefully we will get far more supply, and house prices will fall back quite a bit. May hurt people who overpaid at the top of the market, but that happens.

In terms of inflation, house price inflation has been rampant, and it isn't included for some reason in official inflation rates. But due to the global economy, it is very difficult for NZ wages to increase all that much, unless NZs productivity increases significantly. So we are somewhat stuck in a low inflation market with cheap credit until something bursts.

mattwnz

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#1732603 7-Mar-2017 15:47

robcreid:

mattwnz:

With increased prosperity, you would expect a country to be able to drop their age of super entitlement. Apparently the problem here is the babybookers. But by the time this comes in, a lot of that generation will have already died, so I am not sure of the intention of this, except it is basically taking the problem off the table for the future so it isn't an election issue.

According to this Stats NZ page the baby boomers are around the 50 - 70 mark. You can see the bulges in the graph around the 45 to 55 age mark. Some of them will be dead in 20 years but because there is so many of them and they are on average living longer they will be claiming super for longer with relatively less people on the tax-payer age groups to pay for it.

It looks like the majority of the bulges will already be getting super when this change comes in 20 years which makes it seem a bit like closing the door after the oldys are already out to pasture.

Exactly. If they are making this type of move it has to be 20 years sooner. Otherwise it is purely a political move to get the topic off the table IMO. Other parties though can always change this and move it closer if they campaign on it.

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