We asked Labour's Jacinda Ardern and National's Nikki Kaye: Are we prepared for our generation's retirement?
JACINDA ARDERN
Last weekend I sat in a climate change debate and heard a panelist say something that really struck me: "We only move towards transformational change when we feel truly threatened." Suddenly, I found myself thinking about superannuation policy.
Even mentioning the word 'superannuation', I can feel the collective slumping of shoulders. There is nothing sexy about pensions, but there is something deeply disturbing happening to them at the moment. Not only should we feel threatened; we should all feel angry.
Superannuation has always been something we've been quite useless at. Back in the 70s, Labour Prime Minister Norman Kirk introduced a universal savings scheme. It would have put us on par with Australia and, had we managed to hold onto it, not only would we all have a nice secure retirement to look forward to, the country would have had a kitty of $240 billion for wider investment. But sadly, along came Muldoon with his talk of communism and dancing Cossacks, and the whole thing was canned.
A few decades on and it seems our pattern of behaviour hasn't really changed. During the last term of Government, one thing became obvious: if we wanted to guarantee that our universal pension scheme remained just that, we needed to do more to ensure that government revenue could cover it. Labour's answer was to set up the 'Cullen Fund' - the equivalent of a personal savings account for the country. But, in almost a deja vu moment, the National Party was elected and, in its first budget, suspended payments into our collective savings scheme not for one year, but for the next ten years.
This has never just been about the Government being prepared; it's also about us. We're terrible savers. Kiwisaver was an initiative Labour established to try and remedy that. With a take up rate of almost 1.7 million kiwis, and half a million of those under 24 year of age, we were making real progress. Or so it seemed. In the first budget, the Government cut personal and employer contributions to Kiwisaver in half, and now they are talking about doing the same with Government contributions in the budget to be announced tomorrow
I can't pretend to know what will be in the budget, but I hope National thinks beyond an election cycle with this one. And if they don't, I can almost guarantee that they will tell us that cuts are being made because of the recession and because times are tough. Yes, times are tough, but this government has also had choices. They had the choice of spending $2.5 billion on tax cuts or keeping our superannuation contributions. They had the choice of borrowing the equivalent of $130 million per week to fund those tax cuts or keeping our Kiwisaver scheme stable and trusted. Forgive me if I sound cynical, but I can't help wondering if those choices would have been different had anyone sitting at that Cabinet table been amongst the group who will be affected by this short-sightedness when they retire.
I utterly believe we can afford to maintain a universal pension scheme supported by personal savings. It's just going to take planning and Government making hard choices for transformational change. And to do it before everyone's secure retirement is threatened.
Jacinda Ardern is on Facebook and Twitter @jacindaardern
NIKKI KAYE
At 31 it is quite difficult to imagine what the world and New Zealand will be like in the year 2046 when I could be retiring. While none of us have a crystal ball to see this far in to the future I believe each generation has an obligation to plan for the people that will come after us. While there has been a lot written about the ageing population for decades successive governments have failed to put effective policies in place that show that future generations will have either the funds or people to support the growing number of people retiring.
The Superfund was a partial payment and it makes no sense to borrow money to invest in that scheme. I have little doubt that when New Zealand returns to surplus, that partial pre funding will resume - but that in itself is not the magic answer to the longer term sustainability of super. The answer lies in changing our saving and spending behaviour.
Even if we don't agree on the solution or recipe of policies to ensure that the next generation will be able retire comfortably. We can acknowledge the scale of the problem. Firstly, to get an understanding of the scale of the retirement problem we need to recognise the rapidly decreasing number of people working and paying taxes to support our ageing population. Currently there are about 4 people supporting every retired person. By the year 2046 there will only be 2.3 people in the workforce supporting every retired person.
There are many different ways to confront the problem. National favours tax reform, welfare reform, affordable savings policy, sensible macro-economic policies, the big issues that will rebalance our economy. One of the biggest contributions we can make to ensuring the future affordability of national super is to provide a balanced set of accounts, that gets debt down, promotes productivity, gets people into work and fosters economic growth.
A growing economy will give future generations more choices about their retirement. These choices will form the basis of discussions that future Parliaments will undoubtedly have. In these challenging times cuts to the pension or changes in the age of retirement (as advocated by Labours) are not on the table. I am proud that National has delivered on its promises to protect the vulnerable from the sharpest edges of the recession.
The reforms made to the tax system have indeed helped people to save. We are seeing some positive trends but there is still much work to do. Kiwisaver is one savings option. There are 1.7 million New Zealanders enrolled in Kiwisaver, however, the scheme was designed at a time when the world was booming and the domestic economy was being stoked along by consumption and private debt. The last Government increased government spending by 50 percent in its final five years of office. Clearly, the culture of spending rather than saving came from the top.
But the world has changed and I believe fair minded New Zealanders accept that. That is why changes are coming that ensure Kiwisaver is still around when this generation is ready to retire. Another way we can help ensure the next generation of retirees is to make sure more Kiwis are contributing and in work. That's why welfare reform is so important. The Welfare to Work report focuses on lowering the number of people on welfare benefits by improving work obligations. In the end, work is the only pathway out of poverty. We have made some major steps to change the culture of savings and turn around our rising debt track and return to surplus. We are also backing this up by working to ensure our public services are strong enough to cope with an ageing population in the future.
As a small country we have been through a lot in the last few years, some of which has been out of our control. The challenge is to learn from this period and develop a resilient and realistic economic base that can withstand the tides of time and provide the platform from which to deliver a brighter future for all Kiwis - either working age or retired.
That is what our Government is aiming for in the set of accounts it will present to the country tomorrow. To deliver for older New Zealanders we need to stop borrowing and live within our means. That means making some tough calls at a political level, but on a personal level I believe we can all do our bit - by casting our minds to the sort of retirement we want to have - and by taking responsibility and making our own provisions for our golden years.
Nikki Kaye is on Facebook and Twitter @nikkikaye
