Column: Prefunding super will secure pensions

Superannuation looks like being torn again by partisan division that is not only needless - but is positively irresponsible. Why are there such big divisions over Superannuation policy, and what can we do to move forward?

Retirement income in this country faces an uncertain future. A political consensus which was forged in 1993 between National, Labour and the Alliance (the Accord) was unilaterally broken and declared dead in 1998 when National let the superannuation rate fall below the Accord floor of 65% of the average ordinary time weekly wage in the "policies for progress" package. Since then, parties have been making a range of noises.

One of the issues that isn’t so important, to me anyway, is the question of whether the pension remains universal or not. It is Labour policy to retain a universal system, and the policy of the Greens and the Alliance is the same. National appears to be confused on the issue, and I don’t know what ACT’s policy is. I totally support universal social systems in principle, and in practice they don’t cost all that much more money than targeted ones, due to administrative costs and so on. The way to achieve a form of means testing is simply to tax super like all other income. If people are earning a lot, then they will pay a higher tax rate, and if they earn a huge income, they will get no net super at all, paying it all back in taxes.

What is important though is how the system is funded. All parties agree that there is a need for universal provision of some level of sustenance. The basic division appears to be between those who support a pay-as-you-go scheme (National, Alliance) and those who want some form of pre-funding (Labour, ACT, NZ First).