Government seeks feedback on Dunne’s flexi-pension plan
By Paul McBeth
Aug. 26 (BusinessDesk) - The government is seeking feedback on a proposal by United Future leader and former Revenue Minister Peter Dunne to give pensioners more say in when they claim their superannuation entitlement.
Finance Minister Bill English today released a discussion document and is asking for submissions on whether people should be able to claim a reduced pension early, or defer their entitlement for a bigger superannuation. The government is sticking to Prime Minister John Key’s 2008 pledge not to tinker with super eligibility, and is merely testing public appetite for a conversation on the topic, he said.
Dunne’s proposal would allow people to access superannuation between 60 and 70 years of age, and adjust the level lower by 6 percent for every year before 65, and raise it by 10 percent for every year over. That means if someone took the pension at 60, they would get 73 percent of the rate, while someone taking it at 70 would receive 160 percent.
New Zealand’s universal superannuation is set at about two-thirds of the average wage, and increases are linked to inflation and wages.
“As agreed in the confidence and supply agreement with United Future, we are issuing this discussion paper to test the public appetite for providing more flexibility around when New Zealanders can opt to first receive New Zealand Superannuation,” English said in a statement.
The rising pension and healthcare bill for New Zealand’s ageing population has been a bugbear for the Treasury, which has repeatedly cited it as a major threat to the country’s future finances.
The government spent $9.36 billion on superannuation payments for some 612,000 pensioners in the 11 months to May 31, according to its latest financial statements, amounting to about 17 percent of core tax revenue.
By 2017, that bill is forecast to rise to $12.71 billion to pay for 704,000 superannuitants, according to Budget forecasts. That amounts to the same proportion of tax revenue, which is expected to rise by about 25 percent over that period.
In 2010, the government-appointed Savings Working Group’s pressed for tax reform as a means to improve the nation’s savings rate, and found people under the age of 45 don’t have security for pension income because national superannuation can’t survive in its current form.
Submissions on the document are open until Oct. 11, and English will report to cabinet on the results in November.