WEBVTT - Michael Littlewood: Pensions should never be means tested 0:00:05.721 --> 0:00:09.881 You're listening to the Weekend Collective podcast from News talks 'b. 0:00:10.081 --> 0:00:12.881 Budget didn't bring any changes to the pension, but Christopher 0:00:12.921 --> 0:00:14.921 Luxon has doubled down in his support for raising the 0:00:14.961 --> 0:00:18.561 retirement age. Luxon and soon to be Deputy Prime Minister 0:00:18.641 --> 0:00:20.521 David Seymour are on the same page when it comes 0:00:20.561 --> 0:00:23.801 to raising the retirement age to sixty seven. Not immediately, 0:00:23.801 --> 0:00:26.561 of course, I think they're going to take ten years 0:00:26.601 --> 0:00:28.921 or so to do it. But Seymour says that Winston 0:00:28.961 --> 0:00:30.921 Peters is standing in the way of changes, and there 0:00:30.921 --> 0:00:33.401 are questions about whether it's necessary, whether it's fair or 0:00:33.481 --> 0:00:36.681 even effective. And Michael Littlewood has spent years studying New 0:00:36.721 --> 0:00:40.761 Zealand's retirement policy and he is the co director of 0:00:40.761 --> 0:00:44.321 the Retirement Policy and Research Center. And Michael Littwood is 0:00:44.361 --> 0:00:45.921 with me now, gooday, good afternoon. 0:00:46.561 --> 0:00:49.881 Hi Tim. I'm no longer the co director of the Retirement. 0:00:49.521 --> 0:00:50.961 Follow Oh sorry about that. 0:00:51.041 --> 0:00:53.641 I am retired, but I still have a deep interest 0:00:53.641 --> 0:00:54.401 in this issue. 0:00:55.721 --> 0:01:01.041 Good on you. Okay, sorry about that. Hey, is raising 0:01:01.041 --> 0:01:02.321 the retirement age necessary? 0:01:03.761 --> 0:01:07.001 The short answer is, we don't know. And when people 0:01:07.041 --> 0:01:09.201 say it should be raised to sixty seven or sixty 0:01:09.201 --> 0:01:12.441 eight or even to seventy, as has happened recently in Norway. 0:01:14.601 --> 0:01:17.801 They we can't make that kind of judgment because we 0:01:17.881 --> 0:01:21.681 simply don't have good information. And this is not the 0:01:21.681 --> 0:01:24.121 only area in which we don't have good information. And 0:01:24.161 --> 0:01:26.921 you mentioned the change to care WESA that was announced 0:01:26.961 --> 0:01:29.881 in the budget. I personally would have got rid of 0:01:29.881 --> 0:01:33.361 the tax and centives altogether, but I think it's really 0:01:33.441 --> 0:01:35.481 no business of the government to be involved in that 0:01:35.561 --> 0:01:38.361 kind of thing. So going back to your question about 0:01:38.361 --> 0:01:40.161 the pension age, and I prefer to call it the 0:01:40.201 --> 0:01:42.761 pension age rather than the retirement age, because they are. 0:01:42.521 --> 0:01:47.921 The pension age has been sixty five effectively since the 0:01:47.961 --> 0:01:54.041 Old Age pension began. There were interim arrangements between sixteen 0:01:54.161 --> 0:01:58.801 sixty five back before nineteen seventy three, but then the 0:01:58.921 --> 0:02:02.561 age went back to sixty when Muldoon wanted to get elected, 0:02:03.321 --> 0:02:06.961 and then return to six a few years later. So 0:02:07.281 --> 0:02:10.401 sixty five has been the effect of age. But the 0:02:10.441 --> 0:02:13.321 reason we don't really have enough information on which to 0:02:13.361 --> 0:02:16.441 make any kind of an informed decision is because we 0:02:16.521 --> 0:02:20.761 don't have good information about how people transition from full 0:02:20.761 --> 0:02:25.841 time work to full time retirement. And that's changing that 0:02:25.881 --> 0:02:28.761 people are becoming working much longer than they used to, 0:02:30.321 --> 0:02:36.561 and so I would pause before making any recommendation as 0:02:36.601 --> 0:02:37.881 to what the age should be. 0:02:38.201 --> 0:02:42.561 I guess how long. I guess. The numbers that I've 0:02:42.561 --> 0:02:45.641 heard tuted about how much more it's going to be 0:02:45.641 --> 0:02:48.681 costing over the years are kind of frightening in terms 0:02:48.681 --> 0:02:52.801 of the percentage of GDP we're spending just on sorry, 0:02:52.841 --> 0:02:55.041 the percentage of the government's budget we're spending on retirement. 0:02:55.841 --> 0:02:59.521 Yeah, the dollars look huge, but you express the cost 0:02:59.601 --> 0:03:03.361 as a percentage of GDP. New Zealand has one of 0:03:03.401 --> 0:03:08.481 the lowest costs of the age pension of any developed country, 0:03:08.801 --> 0:03:13.961 and that cost has actually surprisingly been coming down since 0:03:14.001 --> 0:03:17.161 the Treasury started first putting data out on this in 0:03:18.241 --> 0:03:20.081 year two thousand was the first year they did it. 0:03:20.561 --> 0:03:23.761 At that stage it was and the twenty sixty cost 0:03:23.761 --> 0:03:26.241 of New Zealand SUBA was expected to be more than 0:03:26.361 --> 0:03:28.161 nine percent of GDP net. 0:03:28.801 --> 0:03:32.681 Yeah, so you don't think money's a problem, then it's affordable. 0:03:33.041 --> 0:03:36.361 But of course, as with any government spending, it depends 0:03:36.401 --> 0:03:40.281 where you want to put your priorities. So I think 0:03:40.921 --> 0:03:45.001 that's a long roundabout way of saying that we really 0:03:45.201 --> 0:03:48.721 need to get down to fundamentals and gather data on 0:03:48.881 --> 0:03:51.761 what matters in this area. And it's not just the 0:03:51.841 --> 0:03:56.481 age itself, it's issues like home ownership. We've got terrible 0:03:56.561 --> 0:04:00.481 data on home ownership, so we don't really know what 0:04:00.521 --> 0:04:04.041 proportion of the old population owns their own home outright, 0:04:04.041 --> 0:04:07.561 and that's a very important part of the puzzle and 0:04:07.601 --> 0:04:12.281 we need to improve that. We need to have clear 0:04:12.401 --> 0:04:16.561 data about how people are managing. We've got some information 0:04:16.681 --> 0:04:20.321 on that and on that for example, we know that 0:04:20.401 --> 0:04:23.401 the old in New Zealand have one of the lowest 0:04:23.481 --> 0:04:30.041 poverty rates in the OECD. Yeah, so something's working in 0:04:30.081 --> 0:04:31.961 that area. It's just that we don't have a great 0:04:32.041 --> 0:04:35.801 handle on what is working. So before we start tinkering, well, 0:04:35.841 --> 0:04:40.361 we really need to understand the issues. Unfortunately, the Retirement Commission, 0:04:40.401 --> 0:04:43.001 which is where you expect that sort of data to 0:04:43.001 --> 0:04:49.241 come from, isn't given the necessary resources and the necessary 0:04:49.761 --> 0:04:53.161 brief to look at that sort of issue. 0:04:53.481 --> 0:04:55.241 Do you think, I mean, do you think you need 0:04:55.281 --> 0:04:59.001 to tailor the retirement for sorry, pension age or pension 0:04:59.081 --> 0:05:02.801 differently depending on people's individual needs. Are you all for 0:05:02.881 --> 0:05:06.201 means testing or are there other arouse around the one 0:05:06.281 --> 0:05:07.041 size fits all. 0:05:07.881 --> 0:05:12.041 Yeah. I used to be a believer in men's tests. Yeah, 0:05:12.081 --> 0:05:16.921 and that's income and asset because, said quickly, it doesn't 0:05:16.961 --> 0:05:18.961 make a lot of sense to pay money to people 0:05:18.961 --> 0:05:19.681 who don't need it. 0:05:20.281 --> 0:05:22.321 Yeah, well, I guess the question of who needs it 0:05:22.321 --> 0:05:24.041 because the pensions not a hell of a lot of money, 0:05:24.081 --> 0:05:26.441 is it. I mean most people, most people assume you've 0:05:26.481 --> 0:05:29.481 got to augment your income with either your savings or 0:05:29.521 --> 0:05:31.481 you just don't. You don't actually retire. 0:05:32.401 --> 0:05:35.841 Surprisingly, for some people who reach pension age, the New 0:05:35.921 --> 0:05:39.601 Zealand superannuation benefit is actually an improvement in their living standards, 0:05:41.001 --> 0:05:45.481 you know, and those people clearly need that kind of support. 0:05:45.921 --> 0:05:48.681 But just going back to your original question, as I say, 0:05:48.761 --> 0:05:51.161 I used to believe in income and asset tests. But 0:05:51.241 --> 0:05:54.241 you only need to look across to Australia to understand 0:05:54.401 --> 0:06:00.361 what that actually involves. It's a hugely complex system because 0:06:00.361 --> 0:06:04.121 they test both income and assets and it's the hire 0:06:04.201 --> 0:06:06.361 of the tests, the the ply to the pension that 0:06:06.401 --> 0:06:08.321 you get from the state in Australia, which is called 0:06:08.321 --> 0:06:14.681 the age pension. Financial planners love it because the more 0:06:14.681 --> 0:06:17.961 complicated you make the system, the more gaps you create 0:06:18.281 --> 0:06:20.761 and therefore the more opportunities you have you to shelter 0:06:20.801 --> 0:06:26.681 about assets and income. But also it changes people's behavior. 0:06:27.161 --> 0:06:29.081 If you have an income or an asset test, then 0:06:29.121 --> 0:06:34.481 clearly people will work to those tests. And what we 0:06:34.561 --> 0:06:39.441 see in Australia, for example, is fewer older people working 0:06:40.361 --> 0:06:41.161 than in New Zealand. 0:06:41.921 --> 0:06:45.441 What do you think, Well, I think it's Australia. Australia 0:06:45.481 --> 0:06:47.921 is always an unfortunate comparison, doesn't because it always seems 0:06:47.921 --> 0:06:49.761 to have more money to go around on lots of things. 0:06:49.801 --> 0:06:51.041 But it is richer. 0:06:51.321 --> 0:06:54.561 Yeah, it's richer, which does make a big difference. I mean, 0:06:54.801 --> 0:06:57.601 if we're all richer than we wouldn't be so stressed 0:06:57.601 --> 0:06:59.841 about it, I guess. But how would you what changes 0:06:59.841 --> 0:07:02.121 would you make? Would you can? What do you think 0:07:02.201 --> 0:07:03.121 needs to change? 0:07:03.881 --> 0:07:08.001 Well, we have I think the best tier one pension 0:07:08.161 --> 0:07:11.281 in the world, and Tier one is the basic government 0:07:11.401 --> 0:07:14.841 old age income support. It is the best. It can 0:07:14.961 --> 0:07:19.081 unvoudedly be made better. There are some aspects of the 0:07:19.121 --> 0:07:23.601 current rules which do need to be fixed, and we 0:07:23.681 --> 0:07:26.801 need to look at all of the things. An actual 0:07:26.841 --> 0:07:29.281 or real friend and I put a submission into the 0:07:30.241 --> 0:07:35.481 Retirement Commission's twenty nineteen review, and in that we outlined 0:07:35.681 --> 0:07:38.601 everything that the Retirement Commission should be looking at but 0:07:38.721 --> 0:07:40.721 can't because they're not given the brief or the money 0:07:40.721 --> 0:07:47.441 to do it. We identified fourteen questions which need answers 0:07:47.841 --> 0:07:49.961 when we make a final decision on what New Zealand 0:07:49.961 --> 0:07:50.761 soof you should. 0:07:50.481 --> 0:07:53.441 Look like, and can give us a couple of highlights 0:07:53.441 --> 0:07:54.281 of those questions. 0:07:54.601 --> 0:07:57.761 The age, what is the appropriate age? What is the 0:07:57.801 --> 0:08:03.201 appropriate amount? We've never had an evidence led public discussion 0:08:03.961 --> 0:08:06.681 on the size all the shape of New Zealand Super 0:08:07.361 --> 0:08:10.721 We've got there by accident. It happens by accident to 0:08:10.761 --> 0:08:12.401 be the best scheme in the world in my view. 0:08:12.601 --> 0:08:14.761 But we do have an idea about how many more 0:08:14.761 --> 0:08:16.761 people we're going to have it retirement aged. Oh, we've 0:08:16.801 --> 0:08:19.721 lost them there. I think we've just accidently accidently had 0:08:20.881 --> 0:08:22.601 Michael cut off there. I might just see if we 0:08:22.601 --> 0:08:25.201 can get them back. We'll take your feedback on this 0:08:25.281 --> 0:08:31.281 as well, because yeah, I'm keen to dig in on 0:08:31.321 --> 0:08:32.441 that as well. You can, by the way, you can 0:08:32.441 --> 0:08:34.121 text your feedback on that. And just while we're getting 0:08:34.161 --> 0:08:37.481 Michael back on the line, which we are doing right now, 0:08:38.241 --> 0:08:39.641 let's have a look at a couple of the texts. 0:08:41.601 --> 0:08:43.481 What have we got here. It's difficult to quickly do 0:08:43.521 --> 0:08:44.801 that in real time, but I think we've got Michael 0:08:44.841 --> 0:08:46.961 Littleward back now. Sorry, we just lost you there, Michael. 0:08:47.641 --> 0:08:53.201 Not sure what Sorry you were saying. Yeah, the age, 0:08:53.441 --> 0:08:57.161 the amount. One key thing that needs to be really 0:08:57.201 --> 0:08:59.721 fixed is the way in which we calculate the amount 0:08:59.761 --> 0:09:03.961 payable to single people living alone. Yeah, it's higher than 0:09:04.041 --> 0:09:08.601 for single people sharing accommodation, and that creates some distortions 0:09:08.641 --> 0:09:12.681 and difficulties with the application of the payment. So that 0:09:12.721 --> 0:09:16.721 should be simplified. Whether there should be an income test, 0:09:16.881 --> 0:09:20.041 which is the question we were talking about earlier, and separately, 0:09:20.041 --> 0:09:22.961 whether there should be an asset test the rules that 0:09:23.041 --> 0:09:25.281 apply to people who lead New Zealand after the state 0:09:25.321 --> 0:09:28.241 pension age. So there's a whole bunch of stuff that 0:09:28.281 --> 0:09:32.441 we should be talking about, and until we resolve those issues, 0:09:32.601 --> 0:09:36.081 we cannot really say for certain that we know exactly 0:09:36.121 --> 0:09:36.761 what's going on. 0:09:36.961 --> 0:09:40.321 No, I guess there are things you talk about the evidence. 0:09:40.481 --> 0:09:42.401 We can work out a few things in advance in 0:09:42.481 --> 0:09:44.761 terms of projections of how many people are going to 0:09:44.761 --> 0:09:46.681 be living longer and how much the cost is going 0:09:46.761 --> 0:09:49.081 to be to our I mean, what's your view on 0:09:49.081 --> 0:09:50.881 the age? Do you think it needs to go up? 0:09:50.921 --> 0:09:54.481 Because logically, just from a lay point of view, I think, well, 0:09:54.481 --> 0:09:56.961 we're all living longer we've been living. I mean, sixty 0:09:57.041 --> 0:10:00.121 is the new fifty. We're living on average, far longer. 0:10:00.161 --> 0:10:02.001 The cost of the government is clearly a lot more 0:10:03.161 --> 0:10:05.681 I would have assumed, and so to me, it just 0:10:05.721 --> 0:10:07.401 seems like a matter of time before we shove the 0:10:07.441 --> 0:10:07.841 age up. 0:10:08.521 --> 0:10:12.921 Yeah before. I mean, personally, I think it could go up, 0:10:13.521 --> 0:10:15.641 but I wouldn't make that decision unless I had all 0:10:15.681 --> 0:10:17.361 this information that I've been talking about. 0:10:18.201 --> 0:10:20.481 So is that where that's gone wrong? Is that Luxon 0:10:20.521 --> 0:10:23.921 has said that he's you know that he thinks it's irresistible, 0:10:23.921 --> 0:10:27.121 we're going to stick it up, and Winston's resisting. I mean, 0:10:27.161 --> 0:10:29.641 I think everyone's argument for political reasons. You're coming out 0:10:29.681 --> 0:10:31.921 at it from just let's just work it out as 0:10:31.921 --> 0:10:34.241 a sensible solution, regardless of whether you're left or right. 0:10:34.841 --> 0:10:37.481 Indeed, and one of the things that I have discovered 0:10:37.481 --> 0:10:40.241 over the decades that I've been involved in this discussion 0:10:40.881 --> 0:10:44.201 is that leading these decisions to the political process is 0:10:44.241 --> 0:10:45.681 the worst way of doing things. 0:10:46.361 --> 0:10:48.401 So who should well, who should make the decision? 0:10:48.801 --> 0:10:51.641 A good question. Well, I participated in something which was 0:10:52.041 --> 0:10:54.801 almost sort of slightly magical in nineteen ninety one and 0:10:54.881 --> 0:10:56.761 nineteen ninety two. I was a member of the first 0:10:56.761 --> 0:11:00.801 Todd Task Force. Yeah, and I went into that process 0:11:00.921 --> 0:11:04.041 thinking that New Zealanders should be forced to say for retirement, 0:11:04.601 --> 0:11:06.881 but we needed to give them tax breaks in order 0:11:06.921 --> 0:11:09.521 to help them do that, that New Zealand super should 0:11:09.521 --> 0:11:12.041 the income and asset tested. And I was put on 0:11:12.081 --> 0:11:15.841 that commission, I think because I thought those things. But 0:11:15.961 --> 0:11:18.401 the fifteen months or so that we spent on that 0:11:19.801 --> 0:11:22.481 work convinced me that I was wrong on all of 0:11:22.521 --> 0:11:26.721 those things. And of course I've been the lasting me 0:11:26.761 --> 0:11:27.921 boring about it ever since. 0:11:28.481 --> 0:11:31.161 What okay, let's just get on In the end, I mean, 0:11:31.321 --> 0:11:33.241 these are but you can't help. But it be a 0:11:33.241 --> 0:11:38.401 political political question that because that lifeless politics, I guess 0:11:38.961 --> 0:11:39.321 we have. 0:11:39.401 --> 0:11:40.601 To have a consensus. 0:11:41.081 --> 0:11:42.801 And the only way, well, you're never going to get 0:11:42.841 --> 0:11:43.241 that away. 0:11:43.281 --> 0:11:48.401 It's like we had it in nineteen ninety two. It 0:11:49.241 --> 0:11:53.321 didn't survive the referendum, as you as you as you observe. 0:11:54.881 --> 0:11:57.921 But the thing about further, and it applies to both 0:11:57.921 --> 0:12:02.201 public and private provision. Once you've got the data, the 0:12:02.241 --> 0:12:07.001 answers are normally reasonably apparent, even to the political opposition. 0:12:07.761 --> 0:12:11.681 You're very optimistic, and I am optimistic oness because I 0:12:11.681 --> 0:12:14.001 am convinced that if we had all the information that 0:12:14.041 --> 0:12:18.761 we needed, the decisions would be relatively obvious. And what 0:12:18.801 --> 0:12:21.361 you would then say to the system, if you like, 0:12:21.761 --> 0:12:24.801 is we will have a constant review of these things 0:12:24.801 --> 0:12:28.321 so that if the data changes, we test that against 0:12:28.361 --> 0:12:30.961 the system to make sure that it still fits the surface, 0:12:31.641 --> 0:12:33.681 so nothing is locked in stain. And the trouble with 0:12:33.761 --> 0:12:38.161 politics is that the moment it becomes political, people's positions 0:12:38.441 --> 0:12:39.561 get hardened up. 0:12:39.961 --> 0:12:42.441 I guess the reason I'm cynical about that optimism you 0:12:42.441 --> 0:12:45.081 have is because we can have two different parties looking 0:12:45.161 --> 0:12:47.801 at the amount we're spending in our deficits and how 0:12:47.841 --> 0:12:50.441 long how long it's going to be for surpluses, and 0:12:50.641 --> 0:12:53.361 one party will say let's tax and spend them more 0:12:53.401 --> 0:12:54.881 on the other will say, we know we need to 0:12:55.401 --> 0:12:57.961 we need to be conservative, and we have completely different views. 0:12:57.961 --> 0:12:59.761 Why would the pension ase be any different. 0:13:00.161 --> 0:13:03.281 Well, that goes back to another issue about superannuation. When 0:13:03.321 --> 0:13:05.961 you're designing a superinnuation scheme. It doesn't matter whether it's 0:13:06.001 --> 0:13:09.841 public or private. You put to one side the cost issue, 0:13:10.601 --> 0:13:12.961 you say, what is the best scheme that we can have. 0:13:14.841 --> 0:13:17.121 Then you look at the cost, and if the cost 0:13:17.161 --> 0:13:19.681 is unacceptable, then you've got to trim the benefits in 0:13:19.761 --> 0:13:23.401 order to fit in with the envelope. So cost is 0:13:23.441 --> 0:13:25.001 the last thing we should be talking about. And when 0:13:25.041 --> 0:13:28.201 people start panicking about the number of people who are 0:13:28.201 --> 0:13:30.441 going to be reaching state pension age and the huge 0:13:30.441 --> 0:13:32.481 amounts of billions of dollars that we're going to be 0:13:32.521 --> 0:13:34.801 spending and the extra billions that we're going to be 0:13:34.801 --> 0:13:37.841 spending next year and the year after, that's the wrong 0:13:38.241 --> 0:13:39.601 that's the wrong end of the stick. 0:13:41.521 --> 0:13:44.961 Do you think we can get the public on board 0:13:44.961 --> 0:13:46.601 with the change if it had to be made? 0:13:47.241 --> 0:13:50.761 I think so. One of the things that I would 0:13:50.801 --> 0:13:52.441 love to see happen is that we should get rid 0:13:52.441 --> 0:13:56.521 of the New Zealand Superannuation Fund. Now, all of a sudden, 0:13:56.521 --> 0:13:59.201 that changes. One of the puzzles for me on the 0:13:59.241 --> 0:14:02.721 government's finances is that the money that's in that fund 0:14:02.921 --> 0:14:07.321 is not actually regarded as an asset. Okay, So if 0:14:07.401 --> 0:14:10.801 we got rid of that fund, repaid debt. All of 0:14:10.841 --> 0:14:13.081 a sudden, our debt situation looks a lot better. 0:14:14.321 --> 0:14:16.321 I had not. I don't know how many other people 0:14:16.361 --> 0:14:18.321 can consider that, but hey, thanks for your time, Michael. 0:14:18.321 --> 0:14:21.681 I really really appreciate your time. That's Michael well Littlewood. 0:14:21.881 --> 0:14:25.281 He is a former co director of the Retirement Policy 0:14:25.321 --> 0:14:27.321 and Research Center. I think I've got that right. I 0:14:27.401 --> 0:14:29.321 really really appreciate your time than Michael thinks so much. 0:14:29.881 --> 0:14:32.641 For more from the Weekend Collective, listen live to News 0:14:32.681 --> 0:14:36.361 Talk ZB weekends from three pm, or follow the podcast 0:14:36.401 --> 0:14:37.361 on iHeartRadio.