Jack Tame: Should superannuation be means-tested too? - Saturday Morning with Jack Tame

It’s one of the curious things about the structure of modern liberal democracies. 

Whether its sharemarkets or political cycles or even media coverage, a lot of the big forces that shape our society are influenced by short-term incentives.  

It gets us into all sorts of pickles. Take the Three Waters and the crisis with water infrastructure in New Zealand. The main reason we find ourselves with a vast infrastructure deficit is because for decades, heaps of local councils haven’t properly invested to maintain the pipes. Why didn’t they invest? Simple. Investment takes money and money means rates. And with woeful levels of engagement with local body elections, big rates increases and pledges to spend millions on water infrastructure that no one could see or appreciate weren’t exactly vote-winners. Councillors who wanted to be re-elected have been incentivised to defer spending for the future. Someone else’s problem. Predictably, of course, it snowballed.

I think we risk the same thing with the aging population and the future of superannuation in New Zealand. We know that in a few short years, as more baby-boomers retire, the cost for superannuation combined with the impact of an older population on the health system is going to massively increase pressure on the Government books.  

Treasury has been warning about it for ages. There are going to be fewer of us of working age supporting more of us who are retired. And yet since the advent of KiwiSaver, there have been very few big steps to address the fast-approaching meteorite.  

I’m pleased to see the Government move on Kiwisaver contributions in the Budget this week. It’s well overdue in my opinion, and although it’ll be a burden for a lot of businesses in the short term, I’d personally support steps that encouraged a greater rate of retirement saving in the future.  

It occurs to me that a massively underrated component in the Australia vs New Zealand equation is superannuation. Saving for super is compulsory in Australia. But not only are wages higher across the ditch, in six weeks, the compulsory employer rate goes to 12%. I’m not suggesting we instantly introduce a 12% rate here – businesses would be driven into the ground. But it’s interesting to note that in Australia, for most workers, the tax on employer contributions is much lower than that in New Zealand. In the next few decades, Australians are set to retire with hundreds of thousands of dollars more than their New Zealand counterparts.  

I turn 65 in 27 years. I have no expectation that superannuation in its current form will exist by the time I get there. I have a sense of fatalism about the whole thing. It feels inevitable that I’ll be paying for older generations to enjoy universal super, only for the settings to finally change once I’m on the home straight to 65.  

I do find one thing about the Government’s move this week particularly curious. They’ve opened the door to means-testing KiwiSaver. Those who earn more than $180,000 won’t receive the Government contribution.  

I don’t claim to know what the best solution is. But there will be many working New Zealanders wondering, this week... if means-testing KiwiSaver benefits is acceptable, why shouldn’t superannuation be means-tested too?  

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