The Superannuation Debate

The most striking feature of the debate on the Retirement Savings Scheme is its failure to accurately address the issues.

Little has been said about the possible overall impact on savings, the pattern of investment, possible impacts on the exchange rate (if funds are invested abroad), with comparisons to what might be anticipated under alternative schemes. What changes in government expenditure can we expect with the tax cuts, would costs be passed on to individuals?

There has not been much of a historical perspective, although the RSS has some similarities to Labour's short-lived 1975 scheme. For some time, superannuation contributions were tax deductable. That, and its ending, gave some indication of the possible consequences of the steady accumulation of a large volume of funds in a few institutions.

We could possibly learn from overseas experience. Australia has a sizeable fund accumulated already. What have the effects been?

Instead of serious consideration of these fundamental aspects, much of the attention has been on the claims of vocal lobby groups. No policy debate these days would be complete without a gender dimension. This is generally unhelpful unless gender is the appropriate distinguishing characteristic.

It is claimed that women are disadvantaged by the RSS, but they are to get top-up transfers due to their greater life expectancy (irrespective of their earnings), and they would be the main recipients of transfers given as a top-up to those with low earnings as well as the allowances for retirees not in a marriage or de facto relationship. Perhaps the debate should focus on low versus high earners, and life expectancy by several characteristics, not just one.

It is interesting to note that life expectancy differs about as much by ethnicity as it does by gender. If we are going to analyse the situation by non-economic groupings, then arguably Maori men would be the most disadvantaged group in terms of the relationship between amount paid in and the amount received. European women would be the most advantaged.

Several of the suggested problems of the RSS are based on misinformation. For example, it is true that individual schemes are not guaranteed, but the government guarantees that everyone will be able to buy an annuity on turning 65. Also, some problems apply as much to the current scheme, such as pre-marriage superannuation contributions counting as matrimonial property, or the taxability of superannuation paid to retirees living overseas.

If New Zealand is to plan sensibly for the future, we have to think through the options in an appropriate manner. Universities should take a lead in this.

Stuart Birks

2 August 1997