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Doing the right thing on retirement

by Matt Vickers

On Q&A's minor party leaders debate on Sunday, the minor parties responded to Labour's proposal to raise the retirement age.

ACT is all for it, and the Greens, far from closing the door on the idea, have welcomed the discussion -- as a party favoured by youth, a rise in the pension age that keeps super sustainable for future generations is in their constituency's best interests.

Maori and Mana dislike it because of Maori's poor mortality rates. They believe a raise in the age would be unfair to Maori, and they have a valid point.

United Future is proposing a graduated pension: retire at 60 to get a lesser pension, retire at 70 to get more. It's a fiscally neutral policy that has some social merits but does nothing for the economy. Winston Peters did not appear on Q&A, but he did appear on The Nation, and when pressed he would not explicitly rule out working with Labour even if it meant raising the age. I suspect even Winston, champion of the grey, knows it needs to happen in his heart of hearts.

The retirement age is not a left or right issue. It's an intergenerational issue. Because of a general increase in longevity and a shrinking tax-base to keep paying super at the current levels, the age has to go up. It's simple demographics. But who is going to pay and when? Fairness would place the greatest burden with those who give rise to the greatest costs. That is not the generation retiring in 10-30 years and beyond, it is those retiring in the next 20 years. The moment for putting the burden where it belongs may have passed and it may be Generation X's sad fate to assume the role of martyr, but they would probably be happier if that was signposted now, rather than suddenly and messily forced upon them in a decade or two. 

Should National form a government, which looks likely, they may not have the numbers to keep the retirement age at its current level. Labour may not be in a position to form a government after the election, but they could submit a private member's bill on the resumption of parliament. If that bill were drawn, there may be enough support in the House of Representatives to get a retirement age change through. Should ACT return to parliament, they must vote for it or go against their principles and long-standing policy. If ACT doesn't return, National may not have enough coalition partners to keep the change from happening. United is crucial, and if the Maori party turn out to be kingmakers, they may work with Labour and vote for the bill if some form of concession is made for Maori, perhaps something like Peter Dunne suggests.

A graduated scheme, balanced on the fulcrum of 67, might be socially palatable to the minor parties and abate Labour and ACT's economic concerns. It's only National that won't negotiate, and despite current polling it doesn't look like they'll have enough seats to govern alone.

The wildcard is John Banks. If he wins Epsom and assumes control of the ACT party as Patrick Gower speculates, his conservative proclivities could see him side with the Nats to block any bill to change the age. And if that happens, the ACT party as we know it is well and truly over, and they may as well drop the pretence and team up with Colin Craig.

If the bill got through, would National attempt to reverse it?  I think not. A large number of the National Party faithful want a change, they just can't be seen to support a change without alienating their voters and undermining their leader. A change will make the job of balancing the books that much easier. That said, the further out the change is, the more opportunity they will have to campaign on a reversal. If they do that, however, they'll need to outline what the costs would be. And they would be immense.

On Q&A, Steven Joyce argued that it was ridiculous to be debating this because any benefits are 40 years out. It is true that many of baby boomer generation will be dead in 40 years, and that if they're at the older end of their generation they can safely shut their eyes to the problem, and to the idea of a New Zealand that exists after they are gone.

But what's also true is that we are, right now, living with the decisions made 35 years ago and will continue to do so for years to come. In 1975 the people of New Zealand voted against a compulsory superannuation fund that would be at Brian Gaynor's 2007 estimates worth more than 240 billion dollars now. Steven Joyce and his generation may not have to live in the world of 2050, but they will nevertheless live on in the memories of the young as villains or heroes. Muldoon was popular in his time, but history has not been kind to him. It will be less kind to a government that was given a second chance and failed to seize it, no matter how popular that government may appear to be today. 

Labour has done the right thing in starting this debate, and has put the change out a sensible distance to assuage the fear that people might feel about it. But in the interests of fairness, the changes should come sooner.

This talk of having enough warning: how much is enough? Do you need 8 years to plan to work an extra two months? 20 years to plan to work for an extra two years? To paraphrase Churchill, planning is essential but plans are useless: how can someone really plan for a given number of years of retirement, when no one knows the day or the hour of their demise?

God, if you believe in him or her, has a habit of laughing at plans. It's been suggested that people who work longer tend to live longer, and they are healthier and happier too. Perhaps the best retirement plan is to keep working until you absolutely need to retire. If you are healthy and fit, as most 65-year-olds are these days, why wouldn't you? 

But if you cannot work past 65, the government could offer a so-called transitional pension or the unemployment benefit to carry you through to your first pension. We still have a relatively strong welfare state, and it is robust enough right now to take care of those that can't work until 67 for whatever reason, provided we deal with the more general superannuation problem.

With a third of retirees in 2010 choosing to work past the age of 65, and with that number growing, it seems unconscionable to be paying those people a second income when our society is riven by inequality and our economy is strained and cracked like the streets of Christchurch. A lift from 2013, still starting at two months per year, would ease the pressure on the government's books and restore our esteem with the ratings agencies.

Preventing people from drawing a pension while working would help even more. It would be a strong message from the retiring to the working and the young: we care about you, and we care about your future. We've worked our entire lives to create a better world for you, and we'll volunteer to be the first to work a little more so that you can afford to live in it. 

With the increasing disillusionment of our young, which breeds rancour, hopelessness, and crime, this is a message our youth desperately needs to hear. Our youth, despite their lack of engagement, still take their cue from their elders. A generation that puts its self-interest ahead of its kids' needs may find, too late, that the next generation is too selfish to look after them when they really need it.

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