Don Brash is in the news again for another good transitional proposal—not yet to help wean NZers from the great unsustainable pyramid scheme that is govt superannuation, but at least to help get that process started.
From the time Michael Joseph Savage’s Labour Government set up New Zealand’s retirement and pension scheme (you know, back when average life expectancy in New Zealand was about three weeks after you got the gold watch), this was never a pay-as-you-go scheme. It always relied on those still working paying for those who no longer were.
But now there’s too many of the latter and not enough of the former, and while the rapidly increasing number of oldsters is spending more and more, the youngsters whose savings should be paying for them are saving less and less, and being taxed through the nose to fund what will soon be un-fundable.
Actually, when the government is borrowing a quarter of a billion a week just to pay its welfare bill, it’s clear the whole welfare thing is already un-fundable. But while that’s just un-fundable, ‘super’ is becoming super-un-fundable, and it’s only going to get worse. This is a pyramid scheme that is near collapse. It is unsustainable.
So you would think that a simple proposal to begin gradually raising the retirement age would be welcomed, or at least discussed; something that would be announced long in advance, and would come with incentives—i.e., “those who chose to draw the pension down early being paid a lower rate over the rest of their lifetime compared with those who chose to draw the pension down late.”
Dr Don timidly suggests offering this only up to age 67. Actuary Jonathan Eriksen sensibly suggests making such as scheme accessible between 60 and 75.*
A good idea, you would think. Something worth discussing, you would imagine. Except, huh, what’s that … oh, we’ve just been told by those who must be obeyed, that no discussion will be entered into. Hard questions like this will obviously be left to the next generation to sort out.
* (My own suggestion would be to simply announce a gradual raise of the qualifying age one year at a time every couple of years until the whole unsustainable pyramid scheme is gone altogether—giving a grace period of two to three years, while compensating everyone over 65 now by making them entirely exempt from income tax. But that’s just me. And George Reisman.)