Student debt generation to face higher pension age
Monday 06 March 2017 05:51 PM
Student debt generation to face higher pension age, says Labour
By Pattrick Smellie
March 6 (BusinessDesk) - Opposition and government support partners have rounded on the National Party's policy to raise the retirement age to 67, saying that delaying the move for 20 years adds a further burden to the generation that had to borrow for tertiary studies.
Anyone born after June 30, 1972, would face a phased increase in the age of entitlement for the universal state pension under proposals that National says it would not put into law before next year, meaning it plans to fight the Sept. 23 general election on the issue.
Labour Party leader Andrew Little told reporters at Parliament the announcement today by Prime Minister Bill English and Finance Minister Steven Joyce would disadvantage a generation that had already faced higher costs than the generation of retirees who would not be affected by the change.
"1972, if that's the cut-off date now, this is the generation who've had to pay for their education. They're missing out on housing because of this government's housing policy and they're waiting two years longer to get superannuation," said Little, who questioned whether the savings from the move justified it.
"If affordability was the issue, if the difference is 0.6 percent of GDP (gross domestic product), that is a barely negligible saving, so clearly affordability isn't the issue."
English said the 0.6 percent annual saving represented around $4 billion a year and was necessary if the government was to keep being able to fund health, education and other public services without having to raise taxes.
The biggest impact the government could make on the affordability of the state pension would be to restart payments to the New Zealand Superannuation Fund, which were stopped in response to the 2008 global financial crisis and are not scheduled to restart until net government debt falls to 20 percent of GDP, forecast for early next decade.
The Act party leader, David Seymour, labelled the decision "inter-generational theft".
"The Prime Minister is protecting baby boomers, while pulling the rug out from under young people," said Seymour.
New Zealand First leader Winston Peters did not explicitly reject the policy in his first statement on the issue, saying instead that it was "an effort to look responsible by the Prime Minister whilst not actually doing anything".
English said the timing made sense: giving voters an opportunity to vote on the proposal rather than the usual pre-election dynamic, where no party could propose a change that he said all New Zealanders were aware was necessary if the universal state pension was to remain affordable in the future.
"This is just the right thing for New Zealand. The politics can get stuck in cycles where, before every election, every party has to promise that nothing will change and after the election they can't change anything because they promised they wouldn't," he said.
The Retirement Commissioner, Diane Maxwell, had recommended the change occur more quickly because of forecasts of Budget blow-outs in the future caused by a combination mainly of health, pension and debt servicing spending.
English said he had begun work on the policy immediately on becoming Prime Minister in early December after the resignation of his predecessor, John Key, who had promised to resign if the pension age of eligibility were touched on his watch.
Little said Labour would not raise the pension age if it became government, arguing that people who undertake hard physical labour still deserved to be able to retire at that age.
Life expectancy might be rising, but bodies still wore out at about the same rate, Little said.
English and Joyce published forecasts of life expectancy suggesting that people receiving the pension from the age of 67 would still get the entitlement for about the same average length of time after 2037 as today's 65 year-olds.
The policy would maintain a universal pension, with no means-testing.
However, the system for migrants receiving superannuation would become less generous - a move broadly supported by both Little and Peters.
From early next year, new applicants for New Zealand Superannuation would need to have lived in the country for 20 rather than the current 10 year minimum, five of them while over the age of 50. Existing migrant pension recipients would be unaffected.