1. 1 New Zealand goes it alone in Superannuation policy Susan St John University of Auckland

2. 2 Unique features of New Zealand Superannuation  Simple, flexible and fair  Tax funded  Flat rate, taxable  Individual basis  Basic adequacy for those in good health and home owners  Voluntary private savings with no incentives  Broadly sustainable

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4. 4 Policy field: Litany of woes  Broken surcharge promise in 1990  1991 attempt to make NZS a welfare benefit  New tighter surcharge in 1992  1993 Accord  1996 Coalition gets rid of the surcharge  1997 compulsory scheme rejected  PRG 1997 report, sidelined  Failure to solve the tax problem 1998 (Tolis)  Unilateral change to NZS indexation 1998  Expensive new Taskforce set up.

5. 5 Implausible script for a farce?  Remarkable durability  Provides access to an adequate share of output while minimising  Intergenerational inequity  Distortions which impede growth  Fiscal bankruptcy

6. 6 Is NZ Superannuation sustainable?

7. 7 But the poltical saga continues  2000 Indexation provision reversed  Super task force abandoned  Overtures re multiparty talks scorned  NZ Superannuation Fund Bill

8. 8 Prefunding No PreFunding Taxes=9%GDP With PreFunding Taxes = 6% GDP 20002060 Taxes =4% GDP

9. 9 NZ Superannuation Fund  Funded from projected surpluses  Builds up for 25 years  Runs down to ease the transition  Managed at arms length by the ‘Guardians’  Invested using best practice

10. 10 Rhetoric surrounding the fund  Minister of Finance “The Fund will allow us to maintain a universal pension that guarantees a basic minimum standard of living for superannuitants. It will finally give superannuitants some certainty about what the government will be able to provide for them”.  Consensus follows not leads

11. 11 Rationale for the fund?  Prefunding enhances national saving by preventing inappropriate tax cuts  Lower interest rates  The current account deficit falls  Business confidence rises  Share market supported  Quality of investment improves  Economy improves.

12. 12 Political fallout  The Green party opts out  National undecided  Criticisms of fiscal conservatism, opportunity costs, damage to the economy  Winston Peters to the rescue!

13. 13 Private superannuation Between 1990 and 1998  membership of employer-sponsored registered defined benefit schemes fell 25%,  defined contribution scheme membership fell 9.5%

14. 14 Problems for tax neutrality

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16. 16 Problems with NZ model  Potential for instability  Inequity of universal pensions  Penal arrangements for private superannuation - tax neutrality chimera  Inadequate attention to paying for old age care

17. 17 What of the future?  New Zealand Superannuation likely to remain relatively unscathed.  Political conflict will continue.  Private superannuation issues will become more pressing.  Tax incentive arguments not likely to find favour.  New Zealand unlikely to follow in the path of the Australian model.

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