The super debate hasn’t been super. It has missed the most important issues. The government has tried to focus on misleading measures of financial affordability in 2040, in an attempt to position themselves as responsible. But the real issues are about fairness and equity, across and within generations.
New Zealand’s superannuation scheme, universal and indexed to the average wage, has been world leading. Poverty amongst older citizens has been virtually eliminated. NZ Super has become a vital safety net. Around 40 per cent of pensioners rely solely on NZ Super for their retirement income, and for a further 20 per cent, NZ Super makes up 80 per cent of their income.
But this social protection is eroding rapidly. Future generations will face a far more difficult future. The main game changer has been housing. A house now costs around five times salary compared to two-and-a-half times during the 1990s, and home ownership rates have plummeted. While it is still high for senior citizens, increasing numbers of senior citizens are struggling with rising housing costs, as well as bearing the brunt of under-funding of the heath system.
House price speculation has been driven by a tax system that currently loads the tax burden onto wage and salary earners, and gives tax breaks to landlords. Property owners are able to borrow high levels of debt, get a tax free deduction of the interest payments, and pocket the tax free profit on the sale of the property. This skews the system to favour the wealthy and make it impossible for most young people to buy their own home.
The tax system worsens inequality. Over the past two decades, most of the economic benefits have gone to a small proportion of the population, and inequality in New Zealand has widened sharply. The Green Party will introduce a Capital Gains Tax to make the tax system fairer and reduce the burden on lower income earners.
The current system is also unfair across generations. Raising the age of entitlement to Super continues the irresponsible approach of the Baby Boomer generation who have loaded the costs of education onto younger people and charged them interest on student loans. They/we have priced housing out of the reach of most young people and left huge debts for climate change and ecological damage. Younger generations will find it more difficult to accumulate savings and will be less likely to own their own home. Now the government proposes that they will have to work longer until retirement. It is unjust.
The higher age will also further delay retirement for manual workers, many of whom have had a lifetime of physical labour, as well as Māori, who have a lower life expectancy. Many other older people are willing and able to work for longer. A more flexible system is needed, not just pushing out the age from 65 to 67 years old.
Whether or not NZ Super is affordable is a question of priorities. It is not affordable if the government cuts tax on higher income earners, as they did in 2010. This government has already started talking up another round of tax cuts. NZ Super was more affordable in 1982-86 when the top tax rate was 66%. That meant that two thirds of the NZ Super came back to the government. But now the top tax rate is 33%, more of the benefit is going to those who need it the least.
We need a vision for superannuation in the future. For example, it is likely that there will be more automation and fewer jobs, and serious disruption as a result of climate change. Many more people may be entering retirement with few savings and no job prospects in the later years.
We can afford to maintain the age of eligibility at 65 years old, if we make the right choices. We need to change the policies that have driven inequality over the past two decades. Instead of weakening old age support, the Green Party would like the superannuation system to become a foundation for building stronger social protection across society and extending universal benefits.
Barry Coates MP is Green Party spokesperson on Senior Citizens, Commerce and Consumers Affairs, Trade and Investment, Arts and Culture and Gambling. He is a list MP based in Auckland.