Peter Harris on NZ super

See a paper written by Peter Harris CMinstD FRICS in:

This is a (very) brief extract from that paper:

4.9  As others see us…

American academic Kent Weaver has produced a “hypothetical report card” on New Zealand’s retirement income system.

The highest mark (A) is given to the “administrative effectiveness and cost of NZS”.  “Exposure to market risk” rates an A-, which is possibly why “poverty prevention” also rates highly at B+.

“Income replacement” is given a C, which in light of the Cullen comments (quoted earlier in the paper), would be seen as a good grade!

The fail grade (D), is “exposure to political risk”.  This paper argues that on the historical record that risk – at least for the first pillar – has been more theoretical than actual.

On the other hand, the record shows that the political risk around support for second and third pillar savings is very real.

5.0  Conclusion

New Zealand’s retirement income policy history has steadfastly avoided both compulsory individual contribution and any attempt by the government to replicate in retirement incomes that which people earned during working life.  State guarantees of returns to private savings have been limited and are now historical. State subsidies of private savings have never been extensive. “Needs based” policies and programmes–like health, disability and housing support and provision of residential age care facilities – have lifted the pressure on the need to generate more substantial retirement income “in case”.

The universal pension has meant that overall, elder poverty is confined, and lower than that of the population as a whole.  Inflation and longevity risk have been collectivised, so the regime is relatively advantageous for women.

It is generally seen to be equitable, effective and cost-efficient.  The durability of the basic settings implies a high degree of public acceptability.  Whether these historic settings are financially sustainable remains the major matter for policy makers to determine.

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