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Speaker: Doing the right thing on retirement

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  • Bart Janssen,

    The aim must be to allow those who want to work the opportunity to do so and provide those who don't want to work the necessities of life and the luxuries. At any age.

    We can't do that. So we require people to work who don't want to.

    The decision is simply about what age can we afford to allow people to stop working. We thought it was 65, now we've done the maths properly it turns out it can't be 65, so we'll try 67. That may not work either and it may have to be 70. Or we may somehow transform our economy such that we can afford it to be 60 or 50.

    Absent of such a transformation of our economy I am fairly well convinced by the math that the retirement age has to rise.

    Auckland • Since Nov 2006 • 3108 posts Report Reply

  • BenWilson, in reply to Graeme Edgeler,

    I must make it clear that I'm not against pensions, and certainly not advocating they be removed altogether. It might not have been clear that I think lifting the retirement age is wrong, and my alternative wasn't abolishing pensions. Is that clear enough now?

    We don't pay taxes to save for our retirement, we pay taxes in part to support those incapable of supporting themselves, whether it is because age or infirmity or disability.

    I don't agree with your manifesto. I think some of the point of super was that taxes were saved for retirement, and it has been disastrous that no actual saving were ever made for it. Universal pensions are not given because the elderly can't support themselves. They have most of the wealth in this country, and are perfectly capable of selling some, or even all of it, to pay for their retirement, in hundreds of thousands of cases.

    Pensions are given for reasons much more complex than you suggest. I don't necessarily agree with all of them, which is why I'm very happy this conversation is being had now.

    At the same time, there needs to be a solution, so it warrants the debate and if it comes before the House

    Absolutely. It's very much time for this, and there's nothing wrong with raising the idea of raising retirement ages, if only to make it clear what pensions are for, by elucidating the thinking behind them.

    They have been in part a recognition of long service, a form of gratitude to our elders who fought for their freedoms, gave us our lives, our upbringing, our education, and often a lot of support after that. It is an acknowledgement that their ability to contribute to the most hard out productivity is declining, and also that by remaining in a competitive workforce they are often in the way of younger people who have considerable ambitions for business beyond the next few years, who have real reason to upskill because the skills will be valuable for a long time, and, simply put, whose time to run things has come. They are still valued, but pensions are offered so that they can pop off the labour FIFO queue and let kids in at the other end if they so wish. Which a great many do wish. Most people have declining interest in fully committed engagement with their work in their 60s, because they see the end of their lives approaching, and wonder if time in the office was what it was really all about.

    I don't necessarily agree with all of the above, but I think it is a very real sentiment amongst the elderly, and some of the reason they vote for pensions. It's not all about them, some of it really is because it makes the system work better, and if it's better for them, that's good too.

    Auckland • Since Nov 2006 • 8015 posts Report Reply

  • Sacha, in reply to Bart Janssen,

    Or we may somehow transform our economy such that we can afford it to be 60 or 50.

    I believe that's Key, English and Joyce's strategy, such as it is. Beans.

    Ak • Since May 2008 • 15715 posts Report Reply

  • merc,

    Govt. can't have it both ways. They speculate to make profit from retirement funds, they pay those profits back to retirees.

    Since Dec 2006 • 2468 posts Report Reply

  • BenWilson, in reply to Bart Janssen,

    Absent of such a transformation of our economy I am fairly well convinced by the math that the retirement age has to rise.

    I don't believe the economy can't be transformed. Quite the opposite, I think it will transform, whether we like it or not, and can't believe any math that thinks it can project human economics out 22 years.

    Auckland • Since Nov 2006 • 8015 posts Report Reply

  • linger,

    pensions […] have been in part a recognition of long service

    Should pensions then be linked, not to age per se, but to number of years in the workforce (counting from earliest job held)?
    This might increase fairness regarding the discrepancies in life expectancy by race/class (as, e.g., Maori tend to start work at a younger age).
    Though child-raising, home-keeping, etc would need to be counted as workforce experience for this not to introduce gender bias.

    However, using “number of years worked” probably couldn’t be a viable option – this would disadvantage lower-skill workers whose jobs are least stable, and would also be a nightmare to administer.

    [ETA: Snap -- yes, I was editing that while you were posting.]

    Tokyo • Since Apr 2007 • 808 posts Report Reply

  • Sofie Bribiesca, in reply to Graeme Edgeler,

    Well put.

    here and there. • Since Nov 2007 • 5693 posts Report Reply

  • Rich of Observationz,

    There is an alternative way to deal with this: we live on a couple of underpopulated islands. If we managed to attract enough younger migrants, we could move our demographic profile back to the point we want, where there are enough young working people to produce the goods and services the retired need (which is the core problem, and not fully solved by pension funds, however large).

    My pension policy would be to start by moving to open access for under-40's who can find a job. Cut out the red tape and just get people moving here.

    Back in Wellington • Since Nov 2006 • 4209 posts Report Reply

  • BenWilson, in reply to linger,

    Should pensions then be linked, not to age per se, but to number of years in the workforce (counting from earliest job held)?

    That discounts all* childcare and homemaking generally. An extremely female-unfriendly twist.

    *ETA: Amend to "all unpaid"

    Auckland • Since Nov 2006 • 8015 posts Report Reply

  • linger,

    Do we have to conclude that age -- for all its limitations -- is the only practical counter that can be used to administer a pension scheme?

    Tokyo • Since Apr 2007 • 808 posts Report Reply

  • Phil Garnock-Jones, in reply to Graeme Edgeler,

    There used to be a dedicated Social Security tax of 1/6 in the £ (7.5%) that funded superannuation. I forget when (perhaps the Muldoon govt?), but it was subsumed into general revenue with the understanding that taxation would continue to fund super.
    That said, I think it's sensible and fair to raise the entitlement age, and probably sooner than Labour is suggesting. I'll be getting it in 3 years, and I wouldn't mind if I had to wait a couple more months. But because I have contributed all my life, as above, something I tend to see as a bit like a contract, I'd oppose means testing.

    Wellington • Since Nov 2011 • 1 posts Report Reply

  • Bart Janssen, in reply to BenWilson,

    I don’t believe the economy can’t be transformed.

    I also believe the economy can be transformed.

    But I do not believe that any such transformation will come from current economic theory, practiced by both National and Labour. So given the current economic structure I believe we should plan on not being able to retire 'till 67 or 70.

    As an aside my personal opinion is that the only way such a transformation can occur is if we (and the govt that represents us) invest dramatically more in scientific research. NOT innovation, NOT tech transfer, NOT business tax rebates. Just pure and simple put money into the highest quality science we can. That is the only thing historically that has led to the kind of transformation that could allow us to retire at 50. And no I have no idea which bit of research will do the trick but I do know that if you don't do the research you'll end up paying the person who did.

    Auckland • Since Nov 2006 • 3108 posts Report Reply

  • Islander, in reply to Bart Janssen,

    Thank you Bart - I agree & tautoko your opinion.

    From the experience of 3 of my scientist friends (who now live and work in Australia), a simple lack of funding meant they could no longer continue their research here. All worked in NIWA, and their projects were systematically starved of funding - while monies were found for a 'manager.'

    (Sorry you missed out on a Marsden grant by the by-)

    Big O, Mahitahi, Te Wahi … • Since Feb 2007 • 5643 posts Report Reply

  • Kate Hannah, in reply to Bart Janssen,

    +2 (Islander speaks wisely). Good ideas are the only thing that can transform - and we can't know which are the truly great ideas until quite a lot further down the track .....

    Auckland • Since Mar 2010 • 105 posts Report Reply

  • DeepRed, in reply to Islander,

    From the experience of 3 of my scientist friends (who now live and work in Australia), a simple lack of funding meant they could no longer continue their research here. All worked in NIWA, and their projects were systematically starved of funding – while monies were found for a ‘manager.’

    Sounds remarkably like my 3 under-employed post-grad friends I mentioned earlier. And it's going to continue for as long as the McMansion & Hummer cult continues to delude the unwary. D:<

    The southernmost capital … • Since Nov 2006 • 3896 posts Report Reply

  • BenWilson, in reply to Bart Janssen,

    But I do not believe that any such transformation will come from current economic theory, practiced by both National and Labour. So given the current economic structure I believe we should plan on not being able to retire 'till 67 or 70.

    I think Labour's plank could very well be transformative. Compulsory savings in Australia have only been going for 20 years and they have over a trillion dollars socked away. We have hundreds of billions of dollars tied up in capital, the rising value of which incurs no tax at all. That can be transformed very rapidly with CGT. There are a great many other measures besides these that could be tried too.

    Yes, the mainstream parties are generally conservative. But I'm taking a lot of heart that ideas as like CGT and compulsory savings have in a very short time moved from being unthinkable to being things we're discussing the ups and downs of. It confirms my view that we're in a teachable moment, and that the lesson could be from the ground up. I don't see why regressive ideas like raising the pension age need to figure, if we're complaining of a lack of vision from the major parties. That one shows a total lack of vision and compassion, in my opinion, and is simply a bribe to the baby boomers who won't have to suffer it. I actually don't think the baby boomers, on the whole, would agree with it anyway, so it's foolishly divisive, pissing off Generation X who are very soon going to start taking control of this joint.

    Auckland • Since Nov 2006 • 8015 posts Report Reply

  • John Armstrong, in reply to Bart Janssen,

    the only way such a transformation can occur is if we (and the govt that represents us) invest dramatically more in scientific research.

    As someone working in a university history department, I'm not sure I like the sound of that.

    Hamilton • Since Nov 2007 • 126 posts Report Reply

  • Richard Aston,

    Ben - thanks for writing on the notion of super as a thank you to our elders.

    I have been struggling to understand the other line that goes "I paid tax all my life so I deserve some back when I am old" it doesn't feel right and as others have pointed out it does actually work like that economically.

    But to consider the broader aroha of us all looking after our elders in gratitude for the contributions of their lives, in respect for the fact we need elders freed up from nose to the grindstone work to ...um.. Be elders , it feels right. It feels human.

    Auckland • Since Nov 2006 • 421 posts Report Reply

  • Richard Aston,

    Raising the retirement age by 2 yrs may have some merit and some economic advantage ( how much I wonder) .

    But what about a finer tuning of super - asset testing, income testing or even basic needs testing - do you really need this?

    I know many people who are asset rich, have incomes ( investments) and consider getting super a nice little bonus. Surely that just does not make any sense.
    I don't tell me its too complicated to test eligibility, the IRD are masters at in in other domains.

    Auckland • Since Nov 2006 • 421 posts Report Reply

  • Rich of Observationz,

    That is the only thing historically that has led to the kind of transformation that could allow us to retire at 50

    Why can't we just use other people's research? Berners-Lee's research was done in Switzerland and mostly paid for by the EU, but all nations benefited depending on their abilities to exploit it commercially (at which the US took an early lead).

    Back in Wellington • Since Nov 2006 • 4209 posts Report Reply

  • James Millar, in reply to Richard Aston,

    I have been struggling to understand the other line that goes “I paid tax all my life so I deserve some back when I am old” it doesn’t feel right and as others have pointed out it does actually work like that economically.

    I think the demographic issue that a lot of people are missing (not meaning to be ad hominem here - you just referred nicely to the 'commonly made argument' I wish to address) is regarding the huge baby boomer cohort relative to other cohorts.

    To paraphrase the thesis of the excellent book by David Willetts a bit: if there had been no 'bulge in the snake' of increased birth rates between 1946-64 (boomers), then an unfunded pension scheme could have worked quite well at various points in time, as, say*, the 1 million workers in 1960 supported the 250,000 retirees (4:1 ratio), and then the 1 million workers in 1990 supporting the 250,000 retirees - in essence, each generation pays for its parents' retirement, and we get a nice equilibrium.

    The problem lies in that there has been such a demographic bulge such that there are simply far more baby boomers than there are of other generations. Because of this, over 65s are projected to go from 12% of the population now to over 25% in a few decades, and the ratio of workers:retirees is going to plummet from about 4:1 now to 2:1.

    This needs to be addressed and it's good that it's on the table now. Quite simply, later generations like mine (I'm 29) are going to be overwhelmed and face massive tax rises, huge immigration or retirement age rises. It's such a disappointment that Key is putting his head in the sand over this issue and even refusing to acknowledge it's a problem, and refusing to risk even one shred of his immense political capital facing the unpopular task of implementing one of the three solutions needed to avert a crisis.

    * imaginary numbers, but you get the point

    Tāmaki Makaurau • Since May 2007 • 19 posts Report Reply

  • Steve Barnes, in reply to linger,

    Should pensions then be linked, not to age per se, but to number of years in the workforce

    Not if those years were spent behind a desk running a finance company into the ground for your own benefit at the expense of others. No.

    The wireless north ;-) • Since Dec 2006 • 4441 posts Report Reply

  • Bart Janssen, in reply to John Armstrong,

    As someone working in a university history department, I’m not sure I like the sound of that.

    Are you saying you don't think history is/can be scientific?

    I'm not saying only wet bench science gets funding, I'd want any quality science to be funded. So long as it is high quality.

    Auckland • Since Nov 2006 • 3108 posts Report Reply

  • Sacha, in reply to James Millar,

    This needs to be addressed and it's good that it's on the table now.

    The last government set up the Cullen fund as part of pre-funding the retirement bulge, as well as KiwiSaver.

    Current government promptly cut both yet it seems voters love their short-sighted optimism. Just as with Muldoon trashing Douglas's 1970s scheme and in Winston's 1990s referendum.

    If only the pain from that selfishness was more fairly distributed.

    Ak • Since May 2008 • 15715 posts Report Reply

  • Bart Janssen, in reply to Rich of Observationz,

    Why can’t we just use other people’s research?

    You can. And we do. But if someone else did the primary research then they get the greatest benefit because any time you derive something of value from it you have to pay them a cut.

    That's why making the primary discoveries is such a good thing because then you get paid for other folks development of your discovery. You also have the advantage that if you make the discovery the chances are that you will be able to apply it to problems of local interest better and sooner.

    Auckland • Since Nov 2006 • 3108 posts Report Reply

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