Speaker 1: You're listening to the Weekend Collective podcast from News talks 'b.
Speaker 2: Budget didn't bring any changes to the pension, but Christopher
Speaker 2: Luxon has doubled down in his support for raising the
Speaker 2: retirement age. Luxon and soon to be Deputy Prime Minister
Speaker 2: David Seymour are on the same page when it comes
Speaker 2: to raising the retirement age to sixty seven. Not immediately,
Speaker 2: of course, I think they're going to take ten years
Speaker 2: or so to do it. But Seymour says that Winston
Speaker 2: Peters is standing in the way of changes, and there
Speaker 2: are questions about whether it's necessary, whether it's fair or
Speaker 2: even effective. And Michael Littlewood has spent years studying New
Speaker 2: Zealand's retirement policy and he is the co director of
Speaker 2: the Retirement Policy and Research Center. And Michael Littwood is
Speaker 2: with me now, gooday, good afternoon.
Speaker 3: Hi Tim. I'm no longer the co director of the Retirement.
Speaker 2: Follow Oh sorry about that.
Speaker 3: I am retired, but I still have a deep interest
Speaker 3: in this issue.
Speaker 2: Good on you. Okay, sorry about that. Hey, is raising
Speaker 2: the retirement age necessary?
Speaker 3: The short answer is, we don't know. And when people
Speaker 3: say it should be raised to sixty seven or sixty
Speaker 3: eight or even to seventy, as has happened recently in Norway.
Speaker 3: They we can't make that kind of judgment because we
Speaker 3: simply don't have good information. And this is not the
Speaker 3: only area in which we don't have good information. And
Speaker 3: you mentioned the change to care WESA that was announced
Speaker 3: in the budget. I personally would have got rid of
Speaker 3: the tax and centives altogether, but I think it's really
Speaker 3: no business of the government to be involved in that
Speaker 3: kind of thing. So going back to your question about
Speaker 3: the pension age, and I prefer to call it the
Speaker 3: pension age rather than the retirement age, because they are.
Speaker 3: The pension age has been sixty five effectively since the
Speaker 3: Old Age pension began. There were interim arrangements between sixteen
Speaker 3: sixty five back before nineteen seventy three, but then the
Speaker 3: age went back to sixty when Muldoon wanted to get elected,
Speaker 3: and then return to six a few years later. So
Speaker 3: sixty five has been the effect of age. But the
Speaker 3: reason we don't really have enough information on which to
Speaker 3: make any kind of an informed decision is because we
Speaker 3: don't have good information about how people transition from full
Speaker 3: time work to full time retirement. And that's changing that
Speaker 3: people are becoming working much longer than they used to,
Speaker 3: and so I would pause before making any recommendation as
Speaker 3: to what the age should be.
Speaker 2: I guess how long. I guess. The numbers that I've
Speaker 2: heard tuted about how much more it's going to be
Speaker 2: costing over the years are kind of frightening in terms
Speaker 2: of the percentage of GDP we're spending just on sorry,
Speaker 2: the percentage of the government's budget we're spending on retirement.
Speaker 3: Yeah, the dollars look huge, but you express the cost
Speaker 3: as a percentage of GDP. New Zealand has one of
Speaker 3: the lowest costs of the age pension of any developed country,
Speaker 3: and that cost has actually surprisingly been coming down since
Speaker 3: the Treasury started first putting data out on this in
Speaker 3: year two thousand was the first year they did it.
Speaker 3: At that stage it was and the twenty sixty cost
Speaker 3: of New Zealand SUBA was expected to be more than
Speaker 3: nine percent of GDP net.
Speaker 2: Yeah, so you don't think money's a problem, then it's affordable.
Speaker 3: But of course, as with any government spending, it depends
Speaker 3: where you want to put your priorities. So I think
Speaker 3: that's a long roundabout way of saying that we really
Speaker 3: need to get down to fundamentals and gather data on
Speaker 3: what matters in this area. And it's not just the
Speaker 3: age itself, it's issues like home ownership. We've got terrible
Speaker 3: data on home ownership, so we don't really know what
Speaker 3: proportion of the old population owns their own home outright,
Speaker 3: and that's a very important part of the puzzle and
Speaker 3: we need to improve that. We need to have clear
Speaker 3: data about how people are managing. We've got some information
Speaker 3: on that and on that for example, we know that
Speaker 3: the old in New Zealand have one of the lowest
Speaker 3: poverty rates in the OECD. Yeah, so something's working in
Speaker 3: that area. It's just that we don't have a great
Speaker 3: handle on what is working. So before we start tinkering, well,
Speaker 3: we really need to understand the issues. Unfortunately, the Retirement Commission,
Speaker 3: which is where you expect that sort of data to
Speaker 3: come from, isn't given the necessary resources and the necessary
Speaker 3: brief to look at that sort of issue.
Speaker 2: Do you think, I mean, do you think you need
Speaker 2: to tailor the retirement for sorry, pension age or pension
Speaker 2: differently depending on people's individual needs. Are you all for
Speaker 2: means testing or are there other arouse around the one
Speaker 2: size fits all.
Speaker 3: Yeah. I used to be a believer in men's tests. Yeah,
Speaker 3: and that's income and asset because, said quickly, it doesn't
Speaker 3: make a lot of sense to pay money to people
Speaker 3: who don't need it.
Speaker 2: Yeah, well, I guess the question of who needs it
Speaker 2: because the pensions not a hell of a lot of money,
Speaker 2: is it. I mean most people, most people assume you've
Speaker 2: got to augment your income with either your savings or
Speaker 2: you just don't. You don't actually retire.
Speaker 3: Surprisingly, for some people who reach pension age, the New
Speaker 3: Zealand superannuation benefit is actually an improvement in their living standards,
Speaker 3: you know, and those people clearly need that kind of support.
Speaker 3: But just going back to your original question, as I say,
Speaker 3: I used to believe in income and asset tests. But
Speaker 3: you only need to look across to Australia to understand
Speaker 3: what that actually involves. It's a hugely complex system because
Speaker 3: they test both income and assets and it's the hire
Speaker 3: of the tests, the the ply to the pension that
Speaker 3: you get from the state in Australia, which is called
Speaker 3: the age pension. Financial planners love it because the more
Speaker 3: complicated you make the system, the more gaps you create
Speaker 3: and therefore the more opportunities you have you to shelter
Speaker 3: about assets and income. But also it changes people's behavior.
Speaker 3: If you have an income or an asset test, then
Speaker 3: clearly people will work to those tests. And what we
Speaker 3: see in Australia, for example, is fewer older people working
Speaker 3: than in New Zealand.
Speaker 2: What do you think, Well, I think it's Australia. Australia
Speaker 2: is always an unfortunate comparison, doesn't because it always seems
Speaker 2: to have more money to go around on lots of things.
Speaker 3: But it is richer.
Speaker 2: Yeah, it's richer, which does make a big difference. I mean,
Speaker 2: if we're all richer than we wouldn't be so stressed
Speaker 2: about it, I guess. But how would you what changes
Speaker 2: would you make? Would you can? What do you think
Speaker 2: needs to change?
Speaker 3: Well, we have I think the best tier one pension
Speaker 3: in the world, and Tier one is the basic government
Speaker 3: old age income support. It is the best. It can
Speaker 3: unvoudedly be made better. There are some aspects of the
Speaker 3: current rules which do need to be fixed, and we
Speaker 3: need to look at all of the things. An actual
Speaker 3: or real friend and I put a submission into the
Speaker 3: Retirement Commission's twenty nineteen review, and in that we outlined
Speaker 3: everything that the Retirement Commission should be looking at but
Speaker 3: can't because they're not given the brief or the money
Speaker 3: to do it. We identified fourteen questions which need answers
Speaker 3: when we make a final decision on what New Zealand
Speaker 3: soof you should.
Speaker 2: Look like, and can give us a couple of highlights
Speaker 2: of those questions.
Speaker 3: The age, what is the appropriate age? What is the
Speaker 3: appropriate amount? We've never had an evidence led public discussion
Speaker 3: on the size all the shape of New Zealand Super
Speaker 3: We've got there by accident. It happens by accident to
Speaker 3: be the best scheme in the world in my view.
Speaker 2: But we do have an idea about how many more
Speaker 2: people we're going to have it retirement aged. Oh, we've
Speaker 2: lost them there. I think we've just accidently accidently had
Speaker 2: Michael cut off there. I might just see if we
Speaker 2: can get them back. We'll take your feedback on this
Speaker 2: as well, because yeah, I'm keen to dig in on
Speaker 2: that as well. You can, by the way, you can
Speaker 2: text your feedback on that. And just while we're getting
Speaker 2: Michael back on the line, which we are doing right now,
Speaker 2: let's have a look at a couple of the texts.
Speaker 2: What have we got here. It's difficult to quickly do
Speaker 2: that in real time, but I think we've got Michael
Speaker 2: Littleward back now. Sorry, we just lost you there, Michael.
Speaker 3: Not sure what Sorry you were saying. Yeah, the age,
Speaker 3: the amount. One key thing that needs to be really
Speaker 3: fixed is the way in which we calculate the amount
Speaker 3: payable to single people living alone. Yeah, it's higher than
Speaker 3: for single people sharing accommodation, and that creates some distortions
Speaker 3: and difficulties with the application of the payment. So that
Speaker 3: should be simplified. Whether there should be an income test,
Speaker 3: which is the question we were talking about earlier, and separately,
Speaker 3: whether there should be an asset test the rules that
Speaker 3: apply to people who lead New Zealand after the state
Speaker 3: pension age. So there's a whole bunch of stuff that
Speaker 3: we should be talking about, and until we resolve those issues,
Speaker 3: we cannot really say for certain that we know exactly
Speaker 3: what's going on.
Speaker 2: No, I guess there are things you talk about the evidence.
Speaker 2: We can work out a few things in advance in
Speaker 2: terms of projections of how many people are going to
Speaker 2: be living longer and how much the cost is going
Speaker 2: to be to our I mean, what's your view on
Speaker 2: the age? Do you think it needs to go up?
Speaker 2: Because logically, just from a lay point of view, I think, well,
Speaker 2: we're all living longer we've been living. I mean, sixty
Speaker 2: is the new fifty. We're living on average, far longer.
Speaker 2: The cost of the government is clearly a lot more
Speaker 2: I would have assumed, and so to me, it just
Speaker 2: seems like a matter of time before we shove the
Speaker 2: age up.
Speaker 3: Yeah before. I mean, personally, I think it could go up,
Speaker 3: but I wouldn't make that decision unless I had all
Speaker 3: this information that I've been talking about.
Speaker 2: So is that where that's gone wrong? Is that Luxon
Speaker 2: has said that he's you know that he thinks it's irresistible,
Speaker 2: we're going to stick it up, and Winston's resisting. I mean,
Speaker 2: I think everyone's argument for political reasons. You're coming out
Speaker 2: at it from just let's just work it out as
Speaker 2: a sensible solution, regardless of whether you're left or right.
Speaker 3: Indeed, and one of the things that I have discovered
Speaker 3: over the decades that I've been involved in this discussion
Speaker 3: is that leading these decisions to the political process is
Speaker 3: the worst way of doing things.
Speaker 2: So who should well, who should make the decision?
Speaker 3: A good question. Well, I participated in something which was
Speaker 3: almost sort of slightly magical in nineteen ninety one and
Speaker 3: nineteen ninety two. I was a member of the first
Speaker 3: Todd Task Force. Yeah, and I went into that process
Speaker 3: thinking that New Zealanders should be forced to say for retirement,
Speaker 3: but we needed to give them tax breaks in order
Speaker 3: to help them do that, that New Zealand super should
Speaker 3: the income and asset tested. And I was put on
Speaker 3: that commission, I think because I thought those things. But
Speaker 3: the fifteen months or so that we spent on that
Speaker 3: work convinced me that I was wrong on all of
Speaker 3: those things. And of course I've been the lasting me
Speaker 3: boring about it ever since.
Speaker 2: What okay, let's just get on In the end, I mean,
Speaker 2: these are but you can't help. But it be a
Speaker 2: political political question that because that lifeless politics, I guess
Speaker 2: we have.
Speaker 3: To have a consensus.
Speaker 2: And the only way, well, you're never going to get
Speaker 2: that away.
Speaker 3: It's like we had it in nineteen ninety two. It
Speaker 3: didn't survive the referendum, as you as you as you observe.
Speaker 3: But the thing about further, and it applies to both
Speaker 3: public and private provision. Once you've got the data, the
Speaker 3: answers are normally reasonably apparent, even to the political opposition.
Speaker 3: You're very optimistic, and I am optimistic oness because I
Speaker 3: am convinced that if we had all the information that
Speaker 3: we needed, the decisions would be relatively obvious. And what
Speaker 3: you would then say to the system, if you like,
Speaker 3: is we will have a constant review of these things
Speaker 3: so that if the data changes, we test that against
Speaker 3: the system to make sure that it still fits the surface,
Speaker 3: so nothing is locked in stain. And the trouble with
Speaker 3: politics is that the moment it becomes political, people's positions
Speaker 3: get hardened up.
Speaker 2: I guess the reason I'm cynical about that optimism you
Speaker 2: have is because we can have two different parties looking
Speaker 2: at the amount we're spending in our deficits and how
Speaker 2: long how long it's going to be for surpluses, and
Speaker 2: one party will say let's tax and spend them more
Speaker 2: on the other will say, we know we need to
Speaker 2: we need to be conservative, and we have completely different views.
Speaker 2: Why would the pension ase be any different.
Speaker 3: Well, that goes back to another issue about superannuation. When
Speaker 3: you're designing a superinnuation scheme. It doesn't matter whether it's
Speaker 3: public or private. You put to one side the cost issue,
Speaker 3: you say, what is the best scheme that we can have.
Speaker 3: Then you look at the cost, and if the cost
Speaker 3: is unacceptable, then you've got to trim the benefits in
Speaker 3: order to fit in with the envelope. So cost is
Speaker 3: the last thing we should be talking about. And when
Speaker 3: people start panicking about the number of people who are
Speaker 3: going to be reaching state pension age and the huge
Speaker 3: amounts of billions of dollars that we're going to be
Speaker 3: spending and the extra billions that we're going to be
Speaker 3: spending next year and the year after, that's the wrong
Speaker 3: that's the wrong end of the stick.
Speaker 2: Do you think we can get the public on board
Speaker 2: with the change if it had to be made?
Speaker 3: I think so. One of the things that I would
Speaker 3: love to see happen is that we should get rid
Speaker 3: of the New Zealand Superannuation Fund. Now, all of a sudden,
Speaker 3: that changes. One of the puzzles for me on the
Speaker 3: government's finances is that the money that's in that fund
Speaker 3: is not actually regarded as an asset. Okay, So if
Speaker 3: we got rid of that fund, repaid debt. All of
Speaker 3: a sudden, our debt situation looks a lot better.
Speaker 2: I had not. I don't know how many other people
Speaker 2: can consider that, but hey, thanks for your time, Michael.
Speaker 2: I really really appreciate your time. That's Michael well Littlewood.
Speaker 2: He is a former co director of the Retirement Policy
Speaker 2: and Research Center. I think I've got that right. I
Speaker 2: really really appreciate your time than Michael thinks so much.
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