PAUL MCBETH: Whistling the same super tune

Paul McBeth is the editor of The Bottom Line and Curious News, and previously worked at BusinessDesk for 15 years.

Massey University’s annual retirement expenditure guidelines from its Fin-Ed Centre always makes for a sober read.

Anyone thinking they can put their feet up once their gold card arrives, freshly signed by its patron Winston Peters, should probably stop reading now unless they want to burst a pleasant daydream.

Because there’s still a chunky gap between what will land in a superannuitant’s bank account and what they typically spend. For a single person on a no-frills lifestyle, their fortnightly cheque covers about two-thirds of their expenditure.

Sure, the $520 a week is above the poverty line set in last year’s child poverty stats, and people usually adapt to live within their means.

But as recent Retirement Commission research feeding into its upcoming review of retirement income policies shows, 39% of pensioners rely on NZ super for all of their income and another 35% say it accounts for two-thirds – presumably so they can meet that enticing lifestyle free of pesky little luxuries.

And while a net 26% of those older people surveyed for the Retirement Commission work thought they were doing it tougher than they were two years ago as unavoidable bills crept higher, just 12% described the state of their finances as poor or very poor.

Walk tall, act fine

Cue the stereotypical – and often true – image of the freezing pensioner keeping the heater off in winter to keep the power bill down for fear of being a bother.

There’s a reason why we often think of superannuitants as counting out their 10 cent pieces – they have to manage a tight budget and make more trade-offs in deciding how to spend their meagre money, much like beneficiaries or anyone on a low wage.

Hardly the dignified golden years we like to think of as part of New Zealand’s social contract, but that’s also why KiwiSaver’s role in topping up that nest egg in the final quarter or more of our lives is increasingly important in keeping those payday loan debt collectors away from the retirement village door.

And with $181,000 needed for an urban-dwelling solo superannuitant to cover the shortfall for a basic retirement, that’s easily achievable for those at the start of their career, if not for those who feel their ageing knuckles struggling to keep a tight grip on that all-important professional relevance.

As the Massey University report points out, finance minister Nicola Willis’s plans to lift contribution rates earlier this year should make a meaningful difference in building a buffer for KiwiSavers – admittedly taking it back in line with what its architect Michael Cullen envisaged people and their employers should be kicking in back when the scheme was in diapers 18 years ago.

The seriousness of the situation prompted Willis to channel her inner Logan Roy and dismiss any naysayers unwilling to have a savings policy heading into next year’s election as being unserious people.

Never look back

She might want to have a look in the mirror if she thinks that’s a binary choice. Counting the national savings rate as a measure worthy enough of inclusion in the budget might be a good start.

It will probably come as a surprise to some younger folk, but a government or viable opposition should have a clear direction for their policy programme as a whole. Plucking one lever in isolation ignores the trade-offs that invariably come with making an active choice to pay for one thing at the expense of not paying for another.

Striking public service workers had a point when they said the government’s being a little cute by saying there’s no money, when what it actually means is that there’s no money for them.

After all, we’ve been beset by political leaders who’ve preferred not to spell out those choices in favour of borrowing a little more – not just to pay for big ticket capital items like an IT system that makes sure the Inland Revenue Department can collect tax, but to cover its day-to-day bills as well.

If we turn to the Retirement Commission’s survey of oldies, 85% of those who felt comfortable or very comfortable never took out a loan or whacked something on tick to cover a gap, while 33% of those who felt the state of their finances to be poor or very poor top up their bills with the plastic or a payday loan every month.

Nothing’s going to touch you

You might say that’s an unfair comparison, after all a government can levy taxes and borrow money at a stupid low interest rate, but the principle is largely the same.

When Cullen’s idea for what we now know as the $85.65 billion NZ Super Fund first started cropping up in the parliamentary debates 25 years ago, the acerbic one quipped: “If we simply whistle and hope we will either end up with a reduction in entitlements or a very substantial increase in long-term tax rates.”

And even then, the debates raged over whether it was worth smoothing out the pension bill over a 40-year period by using today’s tax take for tomorrow’s bill, given it was only ever going to cover a portion of the superannuation spend, ranging from 14% to 25%, depending on which number cherrypicked by a particular speaker’s politics.

As it stands, the NZ Super Fund is projected to pick up about a fifth of the pension tab when the investment vehicle is at its peak in the mid-2070s, and even doomscrolling the Treasury’s latest long-term prediction of dire times ahead, the government’s financial adviser simply points out that choices have to be made if the nation’s to avoid banana republic-type debt levels, be that through markedly higher taxes and sharply reduced spending.

Run for the shadows

Of course, the Treasury’s own advice has been under the microscope of late. Its $76 million bill on policy wonks might’ve got an ‘achieved’ stamp from the minister in its latest annual report, but some soft results underneath the headline spell out why its pool of deep thinkers are a major part of its 2040 programme.

After all, the Department of Prime Minister and Cabinet has been tasked with lifting policy capability across the entire public service amid a declining quality of papers being put in front of ministers – albeit good enough to pass muster with the elected ones.

While centralising the government’s policy thinking under one department might feel a little command-and-control, it might provide some coherency across policymakers’ entire programme rather than rolling out initiatives piecemeal as if there’s not an opportunity cost with each one.

Because if the soft compulsion of boosting private savings through KiwiSaver is good enough for us to plug the retirement gap in our twilight years, it’s probably appropriate for the Crown to follow suit.

Image from Jeff Sheldon on Unsplash.

This column has been updated to fix a typo.