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Superannuation rears its controversial head again

Friday 1st June 2001

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By Peter V O'Brien

The superannuation debate is back on Parliament's agenda with the introduction of the New Zealand Superannuation Bill, its referral to the finance and expenditure select committee and its eventual referral back.

In broad terms, the bill provides for pre-funding New Zealand Superannuation from taxation, after allowance for the level of fiscal surpluses, to build up an investment fund for future payments to an ageing population.

Table I shows what is expected to happen to the population and other indicators over the next 50 years. Economic forecasts are general estimates because it is difficult to obtain accuracy, given the variables and changing local and international circumstances that could occur.

Population statistical forecasts are probably more accurate, given realistic assumptions about birth and death rates.

Retirement commissioner Colin Blair has urged the public to take an interest in the bill. He said the consequences of retirement income policy decisions had long-term implications for those planning well ahead for retirement.

Perhaps paradoxically, Mr Blair's office did not make a submission on the bill, given his call for people to take an interest in the debate, but it was understandable. He told NBR Personal Investor the office decided to keep out of the submission process. "It is for government and Parliament to make policy and our job to make sure people understand the policy and provide advice to them."

Mr Blair said some aspects of his office's role would need to be re-examined after the bill became an act. The Retirement Income Act, under which the Office of the Retirement Commissioner was established, required a six-yearly review of retirement income policy in the public and private roles.

"That could overlap on what is required under the new act and under the Retirement Income Act." It would be necessary to look at the two acts and see there were no conflicts or duplication.

There were some items related to overall issues, including the implications of a partial pre-funding proposal and what impact that may have on people's private, voluntary contributions to their retirement income. For a period of years there would be no drawdowns, so fund managers would not have to worry about liquidity for some years.

Mr Blair said there were two schools of thought about the new fund:

  • It would give people more certainty and more confidence in the availability of New Zealand Superannuation at certain levels. And they could then take appropriate action;
  • The more certainty you provided, the less incentive there was to make private provision for retirement.

Mr Blair said his office planned to continue as it had in the past.

"New Zealand Superannuation for many people will provide a certain level of income. You assess what you need over and above that and take appropriate action."

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