The Press WEDNESDAY, JUNE 25, 1975. A 'Jam Today’ pension scheme

Press, Volume CXV, Issue 33878, 25 June 1975, Page 14

The Press WEDNESDAY, JUNE 25, 1975. A 'Jam Today’ pension scheme

The National Party is offering electors a national superannuation scheme which would provide substantially higher benefits within the term of the next Parliament. The scheme would cost taxpayers more in the short term than the New Zealand Superannuation Scheme introduced this year, but in the longer term it would probably be cheaper. The National scheme is also more in keeping with the tradition of social welfare benefits in New Zealand. It would involve a greater redistribution of income than the present scheme: it would be tied to average income levels, rather than to the earning capacity of individuals: it should be secure against erosion by inflation: because it is a pay-as-you-go scheme financed directly from taxation no investment fund would be involved. The result should be considerable administrative savings and the risks of political control of the investment funds could not arise. While providing a generous income for all old people who have lived in New Zealand for at least 10 years, National’s scheme would not discourage thrift. Those who wished to make additional provision for their old age through private schemes would be encouraged to do so.

The whole scheme, as outlined yesterday by the Leader of the Opposition (Mr Muldoon), appears to be so fair and so attractive that many Labour Party supporters might wonder why their party had not introduced it. But if the present Government had not pressed ahead with its costly, complicated, and confusing New Zealand Superannuation Scheme it is unlikely that the Opposition would have moved so quickly to produce a substantially better alternative scheme.

The additional cost of the National scheme is its only apparent disadvantage. But the real cost of providing an adequate income in old age for everyone under the New Zealand Superannuation Scheme introduced this year is quite unknown. Only about half the working population belongs to the New Zealand scheme. The full benefit under the present scheme will not be paid to anyone for two generations. Many of those who would receive some benefit under the New Zealand scheme would still need substantial help from a general pension financed from taxation if they were not to be paupers in old age. Under the National scheme those at work now would pay taxes to provide a reasonable retirement income for all old people now with the knowledge that when they retire a new generation of taxpayers would be supporting them at the same level. The principle is simple and equitable.

The cost would be substantial, however. Mr Muldoon has estimated that if the National scheme had been operating this year another $275 million would be required to pay an age benefit to everyone at the level envisaged in the National Party’s proposals. That would require an increase of 13 per cent in income tax or an increase of 8.5 per cent in total taxation of all kinds. Those on higher incomes would pay proportionately more towards the cost of the pension Against this, the extra cost of the present New Zealand scheme, if it was operating fully and was taking 8 per cent of salaries and wages into its invesment fund, would be another $250 million a year. From this, only half the population would benefit and the level of pensions (based on past earnings) which it provided might turn out to be quite inadequate if inflation continues. Additional benefits would have to be provided from taxation, especially for women who had never worked or had worked only a short time. The end result might, as Mr Muldoon claims, be considerably more expensive than his party’s new proposals.