Maoris The Losers In Winston’s Annuity Gamble
Press release by Hamish Anderson, Lecturer, Department of Finance & Property Studies, Massey University (email: H.D.Anderson@massey.ac.nz)
The compulsory superannuation scheme outlined by Treasurer Winston Peters addressed a number the pitfalls previously proposed by the schemes opposition such as the differences in annuities between male and female. However, it fails to address the inequalities between Maori and Pakeha. The average age of Maori males and females is less than the average of their Pakeha counterparts. Therefore on average Maoris will receive considerably less the number annuity payments than Pakeha.
An annuity is a gamble - you are essentially betting that you can outlive the average expected age for your sex. If you outlive the average expected age you are a "winner" - as the annuity provider must continue paying you the annuity. However if you die before your sexes average expected age you are a "looser" in the annuity gamble.
With Maori average life expectancy being lower than the total population average life expectancy for both male and female there will be a greater proportion of Maori "loosers" who would be forced into the annuity gamble when the odds are against them. Ignoring for a moment the profit the annuity provider wishes to make, the "losers" fund the "winners" in an annuity gamble. Consequently a disproportionate number of Maoris will be funding the "winners" - which given history will be Non-Maoris.
The average life expectancies of those who reach the age of 65 for New Zealand’s total population and Maori is presented in the following table:
Total Population |
Maori |
Difference |
|
Male life expectancy |
80.13 years |
77.67 years |
2.46 years |
Average number of monthly payments received |
182 |
152 |
30 |
Average return on your annuity |
4.3% |
2.1% |
2.2% |
Female life expectancy |
83.87 |
80.45 |
3.42 years |
Average number of monthly payments received |
227 |
186 |
41 |
Average return on your annuity |
4.6% |
2.7% |
1.9% |
Non-Maori males attaining their average life expectancy age will earn more than twice the implicit return on their annuity than a Maori male will on average. Female Maoris fair slightly better but their Non-Maoris counterparts will earn a 70% higher implicit return. Maori males will receive on average 30 (approx. $24,000 in payments) less payments than their Non-Maori counterparts and Maori Females 41 (approx. $34,000) payments less.
16 July 1997