Act wants 68 as age for super entitlement

By VERNON SMALL

Act leader Richard Prebble has suggested lifting the superannuation age to 68 and linking super to the inflation rate in order to control its long-term costs.

Act is the only party in Parliament refusing to back Finance Minister Michael Cullen's law locking in an entitlement for a couple to receive no less than 65 per cent of the average wage paid at age 65.

Act favours a guarantee of the current rate for those already retired, tax cuts to help the young save, and a transitional arrangement for those closer to retiring.

Mr Prebble said the crisis was 20 years away.

"The easiest way to fix it is, starting in a decade and over the following 10 years - that is 20 years from now - we should lift the age for Government super to 68."

Combining that with indexing super to the cost of living rather than wages would make an amazing difference to the total cost of super.

"As a percentage of GDP, those two measures hold the cost of super to just a little more than today's costs," he said.

Under current entitlements superannuation costs the Government about 4 per cent of GDP, but that is forecast to peak at 9 per cent as baby boomers retire.

Act will vote against the Dr Cullen's scheme to set aside money to partially prefund baby boomers' pensions.

Mr Prebble said the scheme would almost certainly lose money. "Borrowing to invest on the world equity market is risky and a recipe for losses."

Mr Prebble said a visionary idea would be to put $1000 into an account for babies at birth. At age 65 that would be worth $100,000.

There were 27,000 children born each year, so the annual cost would be $27 million.

"For less than the cost of Dr Cullen's scheme, we could give every child $3000 - that is $300,000 at age 65 - and solve super forever.

"A mad Act idea? No, actually it's called Future Bonds and it's part of Tony Blair's election manifesto in Britain," Mr Prebble said.