Should pensions be means tested like Disability Benefits?

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#1678459 27-Nov-2016 18:49

sbiddle:
TeaLeaf:

Again Aus super is 9%, tax breaks to small business, phased in and old scheme phase out. Kiwi Saver is BS IMO.

Kiwi Saver was a highly watered down system but an attempt to at least do something about super because 91.8% of people voted against compulsory super in a referendum.

If this is the system that TeaLeaf wants, I'm surprised that TeaLeaf isn't advocating it.

TeaLeaf

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#1678534 27-Nov-2016 22:11

sbiddle:

Kiwi Saver was a highly watered down system but an attempt to at least do something about super because 91.8% of people voted against compulsory super in a referendum

Was that compulsory savings by the individual or compulsory that companies pay employee super? (I wasnt aware thanks)

mattwnz

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#1678572 27-Nov-2016 23:19

sbiddle:

Kiwi Saver was a highly watered down system but an attempt to at least do something about super because 91.8% of people voted against compulsory super in a referendum.

Although ironically, Kiwisaver is likely to become compulsory anyway, as the uptake goes up, and obviously the government wants a compulsory system. It them allows them to eventually phase out universal super, although they won't ever say that, because the people in power now won't ever have to make that decision. It could instead be decades away.

Geektastic

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#1678576 27-Nov-2016 23:55

mattwnz:

sbiddle:

Kiwi Saver was a highly watered down system but an attempt to at least do something about super because 91.8% of people voted against compulsory super in a referendum.

Although ironically, Kiwisaver is likely to become compulsory anyway, as the uptake goes up, and obviously the government wants a compulsory system. It them allows them to eventually phase out universal super, although they won't ever say that, because the people in power now won't ever have to make that decision. It could instead be decades away.

I do not see how most people in NZ would ever save enough in KS to fund 25 years of retirement. Especially so the self-employed, of which there are apparently many in NZ, who get no employer contribution and the same tax treatment etc as everyone else.

TeaLeaf

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#1678763 28-Nov-2016 11:54

I sense a few people agree a compulsory Superannuation similar to Australia would be beneficial.

This would take time and transition and require the government to both give tax break especially to small and mid business and to invest in a mentor programme like Australia for Small business.

Not only would it solve super/pensions. It would increase made in NZ and boost our economy. Making us producers less than consumers of often really sub quality products.

One example is how Manuka Honey has taken off in exports and pricing, its crazy how much certain strains of pure Manuka honey cost a tub ($30). But thats a good thing, quality not quantity.

Another example of how the governments over time dont take Made In NZ seriously, the closing of car manufacturing in the 70s/80s. Now we have imports that have no Garuntee of quality even with a VTNZ 150 point check. Clearly a NZ new import is a different scenario. But wouldnt it be great if the reopened some of those Toyota and Mitsubishi (or was it Mazda) plants for employment. Not everyone is a tradey, dairy farmer or IT guru. Clearly the cars thing would be a negotiation with those brands and maybe it was their choice to close them. But Im just trying to give an example.

Again, why cant we employ people to build Tesla factories, wind turbines and use some of the new Solar technology coming out of Victoria Uni to not only dramatically decrease our carbon footprint (lets face it, we didnt create the hole above us but we can help not to make it worse), and have 100% renewable energy. Even hydro electricity is detrimental to our ecology. Transition energy market workers from non renewables to this renewable concept.

The advertisement "100% pure New Zealand" is so misleading, the largest eagle in the world gone, the largest ground based bird gone, the Kakapo at 40 left, 100s of species either endangered or extinct. NZ forests are Silent. The government sacking 600 DOC workers was so darn stupid, no only does it impact one our largest earners, Tourism, it impacts our environment. If everyone has a right to volunteer Environmentalism, I dont see it. But on that, lets sack our Drs and Nurses in line with our Health System level and have volunteers, its everybodies right to care for others (insert sarcasm).

dickytim

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#1678840 28-Nov-2016 13:12

This all assumes the multi millionaire that just sold their house to fund their retirement just had him money magically appear, there is more likely 2 scenarios to this.

1, He/She saved for a very long time and made smart investments rather than spending all their money, they have come to the end of their working life and have equity in their home.

2, The have made a shed load of money somehow and paid a shed load more in tax than most

Both scenarios sees then entitled to the payments after serving their country well.

If the OP has been absent for 15 years NOT paying taxes maybe they should think about how their situation is actually potentially A LOT more unfair to kiwis.

antoniosk

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#1678916 28-Nov-2016 15:14

sbiddle:

Scott3:

You touch on a much bigger issue, Politicians are terrified to touch on this issue despite ample evidence (including statements from the government's own treasury) that the situation is unsustainable.

The very same thing that is causing the issue, makes it politically costly to resolve. The dramatically increasing ratio of those aged 65+ compared to those working age, not only represents a massive cost increase of superannuation payments, but a massive block of (high turnout) voters. The NZ population tryangles demonstrate this quite clearly link.

Politicians are scared to touch it because the results of the 1997 referendum were pretty clear - 91.8% against compulsory super with an 80.3% turnout.

While I'm no leftie the introduction of compulsory super by Labour was a very smart thing. It's a shame Muldoon canned this, as you only need to look at Australia to see how successful this would have been.

So, given Australia's current economic woes, is compulsory super ringfenced and are the funds protected?

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Scott3

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#1679111 28-Nov-2016 21:18

dickytim:

Both scenarios sees then entitled to the payments after serving their country well.

I appreciate that hard work & shrewd investment decisions that have contributed to tax take in the past, but I strongly disagree that this makes anybody entitled to any future payments. Remember the governments of the day already spent all this money (plus about $80B+ more that we carry in debt).

Anyway regardless of any so called "entitlement", according to treasury projections, there is simply no way we can afford it (Superannuation + Healthcare or those to retire in the next decades). Treasury have projected that if we don't change anything, our debt to GDP ratio will be worse than that of greece's in 2015 (and remember there are no EU bail outs for us...) .

While I sit far right on the political spectrum, I must say that the current government's refusal to consider expert evidence and think about the short term only is frustrating.

https://www.nbr.co.nz/article/key-treasurys-long-term-predictions-nonsense-197203

Describing projections as predictions, and attaching the credibility of the advice from your own treasury (partially when it aligns with evidence from other sources) should not be the behaviour of our nation's leaders. The whole point of projections is that things will change in the future, and in-fact to allow decisions to be made to change the course of the projection.

I get the impression that the current government's actions are strictly based boosting their (admittedly very impressive) poll results, while largely ignoring long term issues.

This is probiably more the fault of the electoral system more so than any political party. Our short term democratic election cycle encourages short term thinking to get re-elected next time. By contrast the chinese government is looking 20+ years ahead when it sets its policies (no worry about pesky election cycles or getting re-elected in china). The Philippines used to have a USA style electoral cycle (4 year cycles, max two terms), they worked out that their leaders spent almost all of the first term working to get re-elected, so changed the system to 6 year term's (max 1 term). This means the leader can focus on leaving a long term legacy for the country, rather than just being popular to get re-elected.

sir1963

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#1679157 28-Nov-2016 22:33

Geektastic:

Pensions are not benefits, they are deferred savings plans to fund your retirement. Why should they be means tested?

You should get what you pay for. Many people getting pensions will have paid a fortune in tax in comparison to the bludgers living on the dole etc and never claimed anything.

In NZ, unlike most comparable nations, pension saving is not a tax free activity, either, so there's far less incentive for people to save into private schemes. You'd have to address that IMV before you could even consider means testing state pensions.

No, there was never any deferred savings. Taxes paid, paid for the current government expenses, none was ever "banked" for anyones pension.

A person who has never worked a day in their lives still gets the pension, the same amount that a person who earned $1Million a year gets.

Pensions are paid by tax payers, they are a benefit.

Geektastic

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#1679162 28-Nov-2016 22:56

sir1963:

Geektastic:

Pensions are not benefits, they are deferred savings plans to fund your retirement. Why should they be means tested?

You should get what you pay for. Many people getting pensions will have paid a fortune in tax in comparison to the bludgers living on the dole etc and never claimed anything.

In NZ, unlike most comparable nations, pension saving is not a tax free activity, either, so there's far less incentive for people to save into private schemes. You'd have to address that IMV before you could even consider means testing state pensions.

No, there was never any deferred savings. Taxes paid, paid for the current government expenses, none was ever "banked" for anyones pension.

A person who has never worked a day in their lives still gets the pension, the same amount that a person who earned $1Million a year gets.

Pensions are paid by tax payers, they are a benefit.

If the government forcibly takes my money - regardless of whether they call it tax or savings - they are borrowing part of it now to return it later. That's savings.

The NZ Superannuation Fund, on it's own website, states that

"The Government uses the Fund to save now in order to help pay for the future cost of providing universal superannuation."

It doesn't matter whether I am saving or the government is saving - all the money comes from taxes, i.e. us, not some magic tree of special government money: it's our money and it's being saved.

Any argument to the contrary is simply semantics.

I suppose you could argue that, if you never work and never pay tax then yes it would be benefits but if you've been working and paying big chunks of tax every year then you're simply withdrawing a small amount of that later. It's a tax refund...!

Scott3

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#1679175 28-Nov-2016 23:51

Geektastic:

If the government forcibly takes my money - regardless of whether they call it tax or savings - they are borrowing part of it now to return it later. That's savings.

The NZ Superannuation Fund, on it's own website, states that

"The Government uses the Fund to save now in order to help pay for the future cost of providing universal superannuation."

It doesn't matter whether I am saving or the government is saving - all the money comes from taxes, i.e. us, not some magic tree of special government money: it's our money and it's being saved.

Any argument to the contrary is simply semantics.

I suppose you could argue that, if you never work and never pay tax then yes it would be benefits but if you've been working and paying big chunks of tax every year then you're simply withdrawing a small amount of that later. It's a tax refund...!

The NZ superfund balance is around $30B This will help, but frankly isn't even close to what we would need to keep current superannuation policy in the next couple of decades (also note that NZ hasn't contributed to the fund for many years now). Note that we also have $80B debt on the books, so while past governments have saved a little bit for retirement, they have spent run up far more debt in other areas.

I agree that the superfund should be used for its stated objectives, but it will only cover about 2.5 years of superannuation (at current rates, the cost of this benifit is expected to spike in the future). Beyond that there is nothing saved... Your hard earned tax dollars have already been spent on important things like maintaining roads, the police force, and bailing out finance companies...

TwoSeven

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#1679636 29-Nov-2016 17:54

I think one has to be careful when talking about financial incentives because they have a tendency not to work or produce the opposite result.

Also, the pension fund is paid out of the social security budget - it currently makes up 50% odd of that budget (about 10b itself) or 4% of gdp. Of note that last year, the governments tax take and national savings were increasing.

I would like to see the pension fund move to a fully funded account, so a pension levy similar to acc, and an investment fund like kiwisaver that by legislation cannot be borrowed against or spent by government or have its interest withdrawn.

As I said before I see the pension as investing in people, so we need to think of the net benefits across a much broarder social spectrum than just an economic one.

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Aredwood

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#1679877 30-Nov-2016 00:42

The government should consider reintroducing gift and estate taxes. As not having them is a driver of inequality As rich families are able to easily help their kids get ahead. And it would also encourage elderly people who have a lot of assets to spend more. Which will help the economy.

MaIn reason they didn't previously work was too many loopholes.

And then there is the fact that government paid for rest home care is means tested. Compare that to the pension and it is hard to argue why it is that one is means tested and and not the other.

rmt38

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#1680308 30-Nov-2016 20:58

Aredwood: The government should consider reintroducing gift and estate taxes. As not having them is a driver of inequality As rich families are able to easily help their kids get ahead. And it would also encourage elderly people who have a lot of assets to spend more. Which will help the economy.

How many taxes do we need?

You earn a dollar, you've been taxed at your income tax rate, then taxed again at GST rate. Let's say your rate is 33%, then for every 56 cents you spend, you've been taxed 44 cents.

You buy petrol, then the money you've spent has been income taxed, then you get fuel excised, and then you get GST'd on top of that. How much does a gross dollar earned end up being after it's been tripled taxed? I only buy petrol to go in the push lawn mower, or weed whacker, but still.. the second layer of tax is then paying for something not being used.

Things in this country get subsidised by the taxpayer like WFF, or unemployment and disability benefits, and so forth.. If superannuation becomes means tested, then I see it as another benefit for those that either didn't save, couldn't save enough or wouldn't save. As much as I agree with the idea of subsidising with my earnings unemployment and disability benefits, I am fine with subsidising those who couldn't save enough or have hit hard times with respect to superannuation. But when means testing is employed, and a recipient chose not to save, then how is that fair? That person is IMO less entitled to superannuation than someone who paid lots of tax, and is excluded because of means testing.

JimmyH

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#1680332 30-Nov-2016 21:47

I will add my 2c and say no. Last time they means tested pensions (the surcharge) it was very unpopular, created a whole industry in avoidance, and incentivised skilled people to give up work.

It isn't a bad trade-off - work and pay taxes, and get a modest retirement payment in return.

If they need to cut costs (and I'm prepared to admit they probably do) then I favour one or more of:

1. raising the age - initially to 67 or 68, possibly higher later if lifespans keep rising;

2. increasing the residency requirement for entitlement from 10 years to (say) 25 years; and/or

3. making non-citizens have to have a minimum number of years in which they worked and paid taxes in their residency requirment.

But, if they raise the age then they need to phase it in so that people have sufficient time to adjust. If they raised the age by 2 years spread over 10 around years (so every six months the qualifying age went up by 5 weeks) then that would seem to strike an appropriate balance.

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