We need to talk about the pension

You know the phoney war is over when housing and pensions are back in the political frame. However, there is a reason they’re political footballs – the most obvious solutions are usually the most politically unpalatable.

Hence, National’s backtrack on the infill housing policy that had been stirring up the wealthier leafy suburbs and seen it lose votes to ACT, which has been campaigning against it.

The U-turn looks messy, but probably less so amongst

National’s core supporters than sticking to its guns on the policy; what was intended as a durable crossparty fix for housing affordability has, in reality, resulted in a lot of cheap, hastily-knocked-up terrace developments, and a policy that looks like a leaky-homes-scale disaster in waiting.

Meanwhile, so many politicians have been stung by attempts to tackle the pension problem that it has become almost untouchable as an issue – and so we have ended up with a scheme that pays billionaires the same amount as pensioners who are struggling to pay rent and meet living costs with no savings to fall back on.

Means testing, asset testing – policies that sought to target the pension at those who actually need it – nearly brought down a couple of governments, and so they seem to be permanently off the table.

The problem was that they were set at levels that were simply too mean and spooked mum-and-dad New Zealand. I don’t know when family trusts became popular, but I suspect it was around that time. My father, a teacher, was one of many who rushed to put the family home and the old bach he built with his mates into a family trust ‘‘so the Government won’t take it all when we’re old’’.

Even raising the retirement age to 67 – the policy of least regret and least pain – is fraught. John Key made it a touchstone of his leadership that the pension age would never be lifted under his watch. So it wasn’t till Bill

English stepped into the leadership that it was finally back on the table as National Party policy. Labour also briefly floated it as a policy under Andrew Little, then dropped it like a hot potato because it was unpopular (both the policy, and Labour at that point in time).

But times change.

In the current economic environment, a policy that pays MPs and judges the universal pension on top of their already generous taxpayer-funded retirement savings schemes no longer stacks up. (They even got a generous top-up: thanks to inflation-adjustment, pensions increased by 7.22% in April, and are headed for another big boost next year.)

With retirees feeling materially better off, it’s no surprise that Labour is making pensions a wedge issue at the election by promising not to lift the retirement age.

Announcing the commitment, Deputy Prime Minister Carmel Sepuloni said there was little appetite amongst New Zealanders for a means-testing regime or changing the age of eligibility. Maybe. But the point of leading is having difficult conversations sometimes.

According to a 2019 Retirement Commission report, 44% of Kiwis aged 65-69 are already working past age 65. New Zealand has one of the highest rates of people aged 65-plus still working, at 24%. In the UK, it’s 10%, USA is 19% and Australia is 12%.

The Australian comparison is the most surprising because its pension is not universal. But it has had a long-standing compulsory superannuation scheme which means most Australian workers have a nest egg in retirement. On average that’s worth around $178,000 for men aged between 60 and 64, and around $137,000 among women. But many have more.

Consequently, only about 62% of Australians over 65 receive a full or partial pension, even though asset and income tests don’t kick in until relatively high levels (the cut-off point for a partpension for a couple who don’t own their own home is $1,178,000 for instance).

Australia is also incrementally raising the retirement age: from July 1 this year, the qualifying age will be 67 for anyone born on or after January 1, 1957.

Somehow Australia managed to have a grown-up conversation about pensions that we still haven’t managed. I know we don’t like admitting this as Kiwis, but maybe it’s time we agreed that Australia is beating us hands down on this one.

. . . the point of leading is having difficult conversations sometimes.