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Government seeks feedback on Dunne’s flexi-pension plan

The government is seeking feedback on a proposal by United Future leader and former Revenue Minister Peter Dunne to give pensioners more say in when they claim their superannuation entitlement.

Finance Minister Bill English today released a discussion document and is asking for submissions on whether people should be able to claim a reduced pension early, or defer their entitlement for a bigger superannuation. The government is sticking to Prime Minister John Key's 2008 pledge not to tinker with super eligibility, and is merely testing public appetite for a conversation on the topic, he said.

Dunne's proposal would allow people to access superannuation between 60 and 70 years of age, and adjust the level lower by 6 percent for every year before 65, and raise it by 10 percent for every year over. That means if someone took the pension at 60, they would get 73 percent of the rate, while someone taking it at 70 would receive 160 percent.

New Zealand's universal superannuation is set at about two-thirds of the average wage, and increases are linked to inflation and wages.

"As agreed in the confidence and supply agreement with United Future, we are issuing this discussion paper to test the public appetite for providing more flexibility around when New Zealanders can opt to first receive New Zealand Superannuation," English said in a statement.

The rising pension and healthcare bill for New Zealand's ageing population has been a bugbear for the Treasury, which has repeatedly cited it as a major threat to the country's future finances.

The government spent $9.36 billion on superannuation payments for some 612,000 pensioners in the 11 months to May 31, according to its latest financial statements, amounting to about 17 percent of core tax revenue.

By 2017, that bill is forecast to rise to $12.71 billion to pay for 704,000 superannuitants, according to Budget forecasts. That amounts to the same proportion of tax revenue, which is expected to rise by about 25 percent over that period.

In 2010, the government-appointed Savings Working Group's pressed for tax reform as a means to improve the nation's savings rate, and found people under the age of 45 don't have security for pension income because national superannuation can't survive in its current form.

Submissions on the document are open until Oct. 11, and English will report to cabinet on the results in November.

(BusinessDesk)

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Comments and questions
7

" ... people under the age of 45 don't have security for pension income because national superannuation can't survive in its current form."

So people under 45 are paying into an unsustainable, long-con Ponzi scheme.

Far better to leave age at 65 which at least opens a few vacancies for younger people. Every economy is struggling to employ its people and the price for putting school leavers on the dole is far more than money.

There is no "scheme" into which people are paying. NZ super is funded out of general taxation, just like health care for the elderly. It is actually a form of social welfare.

If a person was required to retire early on medical grounds, with a short-term life expectancy, it would seem rude to allow them to receive the pension at a lesser rate. Would the theoretical discount be repaid to their estate if they failed to make it to 70?

Maori and Pacific Islanders - who have shorter lifespans - would benefit most from being able to take superannuation early, United Future Leader Peter Dunne said this afternoon as he released a discussion paper on his flexible superannuation proposal - Herald.

Did he really say that?

This had been a proposal forwarded by the Maori Party back in 2011.

I think it is entirely sensible to give people options, instead of the current one size fits all decree. And given that the current super scheme is unsustainable, Key has painted himself into a corner with his pledge not to change the scheme. Dunne's policy could give Key a useful "out" without losing too much face.