Is intergenerational conflict on superannuation a phoney war?

by The Listener / 17 March, 2017

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Nothing better illustrates the stark difference between stability and stasis in a democracy than New Zealand’s frustratingly stuck stance on reaching any kind of political consensus on a sustainable future for superannuation.

As of this election, politicians can no longer even agree whether the current system is sustainable. The Retirement Commissioner doesn’t believe it is – but, apparently, what would she know? Roughly half of Parliament is prepared to soldier on as though the present scheme is perfectly affordable over the long term – even if, as is projected, the cost almost doubles by 2060, when it will be consuming more than 7% of GDP. The other half of the House support a variety of ­mutually incompatible solutions to reduce this burden, but no one is ­showing any interest in ­compromising so as to achieve even a modicum of prudent reform.

Prime Minister Bill English deserves points for at least ­putting the issue back on the main stage. His proposal to raise the ­pension age to 67, over three years from 2037, means we will get debate of the issues, but that is all we will get: a lot of words but a ­near-certainty of no action. Such is the political gridlock that there is no hope even of a small bloc of consensus.

There are plenty of other policy options for voters to choose from in September, from lowering the age to 60 (the Maori Party) to means-testing super and ­siphoning off as much of the pension money as possible to a universal ­benefit for every adult (the Opportunities Party). But all the offered options are going precisely nowhere.

It’s a wretched commentary on our political leadership that the one option voters cannot expect is the one thing that would work: a majority political consensus. Ideally, National and Labour would hold hands across a potentially unpopular but ­sustainable superannuation future. There would be a staged rise in the age of entitlement – fairly based on our longer life ­expectancy – and KiwiSaver would be made compulsory. National’s ­proposed 20-year grandfathering threshold could stand reduction to closer to 10 years, to put less of the burden on younger workers. On present actuarial data for health and lifespan, such a ­grand-coalition compact would not impoverish or even unduly disadvantage any household.

Future generations can, of course, recalibrate the regime if demographic projections change. And there should always be special provisions for those who, through poor health or disability, need to draw their pension earlier – even than at 65. But unless and until a commanding bloc of MPs can show some self-restraint and commit to a sustainable, evidence-based ­configuration for long-term pension provision, the issue will continue to deserve more than any other that hackneyed ­description, “political football”.

The worst of it is that, yet again, those hurt most by both the continuation of the existing system and the constant blame-fest and uncertainty about when and how it might change are low-income workers. Least able to save to supplement the pension, they are also the more likely to have had physically taxing careers. Lines repairers, rest-home care workers, builders’ labourers are people whose bodies often wear out before 60. The Government’s new proposal doubles down on them by saying they will not be allowed an unemployment ­benefit if they find themselves jobless between 60 and 65 (rising to 67). They will be expected to draw on their KiwiSaver early, and/or cash up assets. This is simply heartless.

Equally regrettable is the rancorous boomers-versus-everyone-else focus of the super debate, and MPs who mine this seam of latent bitterness deserve a rebuke. We are all, by definition, the children of a generation other than our own, and most of us become parents and grandparents of subsequent demographic groups. Intergenerational nurturing and empathy are ­fundamental to our humanity: we’re all in this economy together, and squabbling over which age group funded which infrastructure and had/has the biggest struggle is a phoney war.

Each generation of political leadership acts out of self-interest, but none is deaf to fairness. The question for this election is, will any party finally be brave enough to clear its manifesto slate and open negotiations for a consensus? If not, then all the parties are wasting our time and the debate might as well end now.

This article was first published in the March 25, 2017 issue of the New Zealand Listener. Follow the Listener on Twitter, Facebook and sign up to the weekly newsletter.

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