Pensions: here, there, and what’s ahead?

How does our pension system compare with those elsewhere?  And what changes have there been? Kent Weaver, an international expert on pensions, spoke mid-August 2018 at the Wellington Law School.  His summary: lots of change, but most things stay the same. New Zealand has become an outlier for its non-contributory (well, not a direct contribution), universal, and flat rate scheme.  Some countries had elements of these but most have moved to a mixture of means testing, contributory, non-flat rate, and other schemes, usually as a result of financial cutbacks.

New Zealand has had no real changes since 2001, so the question is why?  Kent suggested there were a few factors. First off was the collective trauma of the 1990s, which politicians are very reluctant to repeat.  Then there is MMP, which makes collective action by parties to agree on unpopular measures very difficult, mainly because of the numbers of parties.  And of course Grey Power! Kent also talked about there being “windows” for the introduction of big changes, which NZ has probably missed. There’s also the factor that the NZ birth rate has not fallen as much as a lot of countries.  Perhaps the biggest barrier to change is the universal and uniform nature of the pension: it creates a big constituency that would fight against cutbacks. Politicians like to deal with crises by doing unpopular stuff in less visible areas (eg the Kiwisaver contribution cutbacks by the last government), and the present system doesn’t have many edges.

Possible changes?  Kent thought there seemed little official appetite for changing the qualifying period for full pension (currently 10 years) though I do notice there’s a proposed Bill to up this figure.  My thoughts are that the 1990s trauma will gradually fade from memory, and Winston must leave the stage sooner or later, but even so it will be hard (but not impossible) for any government to make changes in this area.                 By Owen Watson

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