Four reasons Peter Dunne’s flexible superannuation proposal isn’t a good idea

It won’t reduce the cost of Super
Treasury estimate flexible superannuation risks adding to the cost of superannuation.

It will lead to greater poverty
People on low incomes are most likely to need, or be forced, to stop working early, they’re also the least likely to have a lot of savings. The most marginalised are also the most likely to die early.
A single person electing to take their superannuation at 60 instead of 69 will get $244.24 in the hand less per week. This would be almost $80 pw less than what they get now. This is not fair and will create real poverty.

New Zealand currently enjoys some of the lowest rates of poverty amongst the elderly. Let’s not risk that with well-intentioned but poorly thought out policy changes

If people can’t work before they turn 65, provide a mean-tested benefit to help them transition to superannuation.

It will lead to greater inequality
It will increase poverty for those most likely to take the early option and increase wealth for those able to work longer.

It misses the point of superannuation.
Dunne’s proposal promotes the belief that superannuation is a set amount of money available to each individual. It’s not. It’s a benefit that ensures continued participation in society by the elderly.

8 thoughts on “Four reasons Peter Dunne’s flexible superannuation proposal isn’t a good idea

  1. @photonz1: “What do you think happens job vacancies when people in their 60s retire? Do you think they are all filled by 80 year olds? Or, as I said, does it free up jobs for younger people?”

    Perhaps in practice this describes what we have right now, but in a well functioning economy, I wouldn’t think that older people should be obliged to retire to make way for younger people. I also don’t think people should be obliged to keep working forever, but it should still be recognised that when a person retires (or otherwise fails to be able to work), we still lose their output, and that’s a cost for the whole system.

    The availability of not just a larger workforce, but a highly qualified and experienced workforce in combination with incoming younger workers, should be resulting in a greater output overall than if all the old people simply leave so that younger people can take their place.

  2. Robert says “4) I had no idea that the over 60s were taking jobs from younger people. Who knew?”

    What do you think happens job vacancies when people in their 60s retire?

    Do you think they are all filled by 80 year olds?

    Or, as I said, does it free up jobs for younger people?

  3. Of the criticisms levelled here, number 4 is the most telling.

    Risk of costing more is not a wrongness, nor is the notion that it may not save money… unless it is being promoted as a way to save money.

    It DOES promote inequality, but it is an inequality based on the ability to continue working and living longer than the actuaries expect. A funny sort of bet but not necessarily reinforcing the existing inequality of wealth.

    This is a tricky thing to evaluate, but I think on the whole that it is a matter of no great consequence apart from the fact that it implies and encourages people to think about super as something it is not.

  4. Jan

    This pair of sentences don’t seem to go together properly.

    “A single person electing to take their superannuation at 60 instead of 69 will get $244.24 in the hand less per week. This would be almost $80
    pw less than what they get now.”

    I suspect you meant to say

    ‘A single person electing to take their superannuation at 60 instead of 69 will get $244.24 in the hand less per week.’

    ?

  5. Re Phontonz points:
    4) I had no idea that the over 60s were taking jobs from younger people. Who knew?
    3) I actually agree with this point, but think I should be able to retire at age 30. Why should I work when I am still young enough to travel the world on a shoestring?
    2) I am Maori, and therefore have a shorter lifespan. Actually I have some health issues that Maori tend to be overrepresented in (again see #3 above)
    1) Being ignorant of both the economic consequences of the geriatric job thieves and the cost of super I guess I have to agree it won’t cost a cent more.

  6. Time for the guaranteed universal basic income then? I doubt it now that the Greens are becoming more conservative eh? Good luck Russell on fiance one day.

  7. Four reasons Peter Dunne’s flexible superannuation proposal is a good idea.

    1/ Despite more options for people, it need not cost the taxpayer any more.

    2/ People in demographics with a shorter expected life span can still have a retirement.

    3/ People can retire while they still have the health and ability to do things (and not have to wear out their bodies by HAVING to continue working years longer they they should)

    4/ Despite no extra cost, it frees up jobs for younger people.

    It’s a debate we should have – there are obvious pros. And obvious cons, as Jan pointed out above.

  8. I understand your concerns but would like to point out that a similar system works well in Canada, it is a kind of bridging plan for people who can’t work til 65. There is nothing for those people now, and this would give them a reduced pension till they are 65 but at least it’s something, better than the dole which is demeaning. If its not enough, lets give everyone full super at 60.

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