Super sense

The ODT editorial makes a sensible contribution to discussions on superannuation.

Of the Superannuation Fund it says:

Its principal weakness was its potential impact on future Budgets and future superannuation payments in times of economic gloom, for the first decision in any future Budget for the next 25 years will be the call on superannuation funds, not less than $2 billion every time, and such a burden will inevitably have an impact on other spending plans.

It has not taken long for negative circumstances to arise or for a government to have to face the unpalatable.

. . . The Treasurer’s decision to suspend contributions is correct because it makes no sense to continue with borrowed money. The Cullen scheme was designed only to soak up surpluses – to keep the “savings” in the bank, so to speak.

Borrowing to invest isn’t sensible for individuals, it makes even less sense for governments.

The editorial goes on to say there has been an encouraging response towards saving more from young people with good incomes but older people with little earning time left before they retire and people with little disposable income to save don’t have this option.

The editorial then canvases the idea of increasing the age of eligibility.

But, as a correspondent to our letters column noted, not everyone makes their income sitting at a computer desk; many spend their lives in hard, physical work, and the prospect of still having to do that at 68 to even 70 before being eligible for superannuation is, at the very least, disheartening.

Two of our staff would be affronted by the suggestion they’d be too old for physical work at 68 or 70.

One came to do three days tractor work for us in 1989 and never left. He turned 79 a couple of months ago, still works fulltime and has no intention of retiring soon.

Another is 77 and dags thousands of sheep a week, though he doesn’t work fulltime – he takes Wednesday afternoon off to play bridge.

A prudent person, perhaps now in their 20s or 30s, should realise there is a high probability universal state superannuation is unsustainable in its present form; that it is a false mindset to assume because people have paid their taxes they will get state superannuation; that superannuation will inevitably be means tested and the retirement age extended. It is a sobering but realistic prospect.

Another option for making superannuation more secure is to follow the suggestion made by Gareth Morgan to wind up the Superfund and pay it in to individual KiwiSaver accounts.

That might not be easy to do, but it would take the politics out of the issue because no politician would suggest meddling with individuals’ retirement savings.