Why not talk to us, we’ll still be here in 2040: raising the entitlement age for Super

So Bill finally came through on his “wait and see” with an announcement that the age of entitlement will be raised from 65 to 67 years in 2040. After which various political parties lost their collective rag either because it wasn’t high enough or soon enough, or more commonly because Bill wasn’t thinking of the impoverished elderly in 2040, particularly the brown ones! Bill said it will all die down and everyone will come to see it his way; just wait and see.

My favourite advice to all of these political parties and commentators was captured in a tweet that you can be assured will go unheeded:

rutherford tweet

Little chance of that. Nevertheless, as someone who is still flying under 45 and will now be faced with getting Super when I am 67, I’ll try to give you older lot a bit of perspective.

We all know that Superannuation as it currently is, universal over the age of 65, is not sustainable. When Steven Joyce said it was sustainable for another 50 years, he was lying. The population is aging and we, like most OECD countries, have a dropping birth rate that is skewed a little by Māori and Pacific Peoples younger age and higher birth rate. But our Māori and the Pacific populations are also going to age and have a dropping birth rate in the next 20-30 years as well. So the tax revenue is under pressure and Superannuation is the largest part of that (that’s right Boomers, its not the beneficiaries who are the real drag on our economy).

So most people my age accept that it has to go up at some point, with 67 – 70 years being the range of views. A lot of people my age even think it should be means-tested. We could start that tomorrow actually; then all you old Pākehā buggers buying houses might feel a little of our suffering.

The Māori Party objection is that Māori people are disproportionately involved in manual and low skill industries that take a huge toll on the body, and Māori also have a lower life expectancy (73 years for Māori males and 77 years for Māori females). So the argument goes that Māori are less likely to enjoy the benefit of a life paying tax than other groups in our society.

There are a couple of flaws in that argument. Here in Tauranga Moana, the key industries with large Māori workforces today are horticulture (i.e. kiwifruit), fisheries, the port, and health services (i.e. God’s waiting room). Those industries are becoming increasingly automated. I have seen a robot built here that picks kiwifruit at a faster pace than a human and 24 hours a day. Removing people from the wharf with self-driving vehicles is an health and safety no-brainer, and the first self-driving cargo ship is being trialed in the next two years overseas. The jobs of today will not be there for my or the next generation. We cannot argue for Super on the basis of jobs that won’t exist in the next 10-20 years. Secondly, the argument assumes that Māori life expectancy is not going to rise, which is against the evidence. The gap has decreased considerably, which is to say Māori life expectancy has risen faster than the general population life expectancy in the last 50 years as disparities are addressed.

A more compelling objection is that the current government has done little to prepare for 2040 and put pressures on us that other generations haven’t had, particularly in relation to housing. It has been over eight years since the National-led government made a deposit in the Super Fund. As a country then we are literally billions of dollars poorer than we might have been if they had prioritised the Super Fund. Steven Joyce’s rosy picture of sustainability might have been reality if they had been making deposits and we might not have had to have this discussion. So the objection is that the current government is putting the problem on to us, whilst every single person currently at the Cabinet table will get Super.

The other problem is that the Super is related to other issues. See the government is banking on us saving for our retirement through Kiwisaver. But if you haven’t got a house yet, than you will likely use your Kiwisaver for a deposit, which means the good idea of an individual savings is undermined as you are restarting in your 30s or 40s. So the objection is that a policy to raise entitlement needs to be more comprehensive, for example thinking about how to get our generation into homes as well.

I think we should raise the age of entitlement. But I don’t think Bill just saying that makes it real. Rather, we should be having a broad policy discussion about retirement in 2040 that looks at the pressures on our current generation, the specific pressures for Māori and Pacific peoples due to disparities, and then kickstarts a national discussion of options for meeting the needs of people retiring in 2040 for quality of life, housing, living costs, travel engagement in the wider community, and health care. Those options will clearly include what we do with Super, but also what we do with the Super Fund, how we get a handle on the current housing crisis, and understanding industry and employment in the next 23 years.

Or not. We could just watch entitled politicians yell at each other.

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2 thoughts on “Why not talk to us, we’ll still be here in 2040: raising the entitlement age for Super

  1. Kia ora Graham – good stuff! (As usual.) Just a few points from the perspective of a ’49er! I joined the workforce in 1966 – not thinking too much about retirement then, but I do remember Muldoon’s decision in late 1975 to abolish the compulsory super scheme. An elderly socialist whom I got to know, subsequently informed me that I, my generation, had been shafted!
    According to Bryan Gaynor, if Muldoon had not put the scheme to the sword, it would now be worth $240 billion! (We would now be in a similar position to Singapore.) Of course it is a moot point as to whether those gains would have been evenly spread.

    Not all pakeha “old buggers” are buying houses – only those who can afford to do so! (I have visited “retirement villages/hostels” with a clientele who are almost 100% pakeha and these places are not attractive at all! More like cheap back-packer’s outfits.)

    The impact of robots and AI will be immense and, as you point out, will have a serious effect on all of society and in particular those who work in occupations which lend themselves to “replacement” – this phenomena will be (and is) no respecter of persons – lawyers through to labourers.

    Alex

    1. As always a thoughtful response e hoa. Certainly I realise it’s not all elderly Pākehā, but it’s a moot point that the majority of our property owners and developers are of a whiter shade of pale. I suspect the skewed economy will matter more in the long term than two extra years until Super.

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