National should reconsider super position - ACT

Tax rates will have to be hiked if age of eligibility left at 65, says John Banks.

ACT leader John Banks today said National should reconsider its position on the age eligibility for NZ Superannuation if we are to avoid the situation outlined by the Financial Services Council, where tax rates would have to rise by one third to pay for it.

“If the age is left at 65, the FSC says that income tax rates would have to rise from 17.5% to 22%, and from 33% rate to 42% by 2080. GST and the company tax rate would be forced to rise, too,” Mr Banks said.

“While the FSC looks quite far into the future, it is no excuse not to debate the issue as it is affecting us now."

NZ Super was one of the fastest-growing areas of government expenditure and by 2016 would comprise nearly 55% of the total benefits paid by the government, he said.

“New Zealand’s demographics are changing quickly. Today there are approximately five workers to support every one retiree.

"By the late 2020s this ratio drops to three workers per retiree and by 2050 there will only be 2.5 people working to support every one retiree. By 2080 it’s even worse."

That was a large financial burden to be placed on so few people, Mr Banks said.

“We are also living longer and are healthier than ever before. Since NZ Super was introduced in its current form, in 1977, life expectancy has risen six years for women and nine years for men and will keep rising.

“As a party that is committed to smaller government, ACT believes this problem must be addressed now.

"Increasing the age by two months a year, every year, until the age of eligibility reaches 67 – an adjustment over 12 years – is a fair way of introducing the change and will give people time to adjust,” Mr Banks said.  

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