1 Is New Zealand Superannuation sustainable? April 5 th 2004 Grey Power conference Waipuna lodge Susan St John Auckland University

2 Is everything in the garden lovely?

3 Our system is uniquely simple, fair and effective –Flat rate and non-contributory- –Full coverage –Ideal annuity- can't be matched by the private sector –Very good for women –Not overly expensive –Has been effective

4 One of the best systems in the world? –Many countries have limited basic coverage, much higher projected costs –Very good model for developing countries Two legs are better than three!

5 The current UK pension system is not sustainable

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8 Over one third need mean tested top-ups Pensioners, especially the oldest, are poor compared to the rest of society Private saving is insufficient for future retirement income to reach today’s standards

9 Is NZ Superannuation affordable?

10 Context: The baby boom retirement- from

11 Improved life expectancy- Stats NZ Gains of 3.1 years for males and 2.2 years for females since 1990–92.

12 Longevity gains are most at older ages – Stats NZ

13 Demographic change in older age group

14 Residential care usage Stats NZ 1998

15 What is government doing? New legislation on asset testing?

16 Health expenditure

17 Ageing will have profound implications: For the medical and nursing profession For the quality of everyone’s life We will need a highly skilled workforce

18 Where is NZS vulnerable? Anyone that doesn't think there's a big generational war coming must be on Prozac Laurence Kotlikoff, Boston University 'The Coming Generational Storm'.

19 “Its like working and getting the dole”

20 Large redistribution to wealthiest over 65 Tax cuts 1996 Indexed pension Removal of the surcharge $385 more a week to the wealthiest since 1996

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Diseases in Children and Young People in New Zealand Thanks to Professor Innes Asher Auckland Starship Hospital Shocking ‘developing country’ diseases Rates of some diseases more than doubled since 1991 Rates still increasing Related to poverty, overcrowding and poor primary health care

24 Is the level of NZ Superannuation too high?

25 How much is it? After tax weekly rate $245 a week (living alone) $ (married person)

26 –Relative rate has fallen and with it some evidence of poverty is emerging—inner city problems –Amount is not much compared to rate rises transport costs— many do extra-ordinarily well –Far fewer private pensions in the future

27 Should the age be raised ?

28 Raising the age

29 What is government doing? 1. The Cullen fund

30 The New Zealand Superannuation fund “The Fund will allow us to maintain a universal pension that guarantees a basic minimum standard of living for superannuitants”. M Cullen ( 2001) 65 at 65

31 Today- workers pay for pensions through taxes Next 25 years they also put money into the fund taxes from workers are still needed but fund helps pay for pensions

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33 What about assumed returns? 11% 7%

34 Will it solve the problem? 5 2 Division still requires same sacrifice