COMMENT: Labour seeks moral high ground with pension policy

COMMENT: Labour seeks moral high ground with pension policy

By Pattrick Smellie

Oct. 27 (BusinessDesk) – Labour leader Phil Goff is to be congratulated for breaking the dam on the increasingly untenable notion that 65 would forever remain the age of entitlement for the state pension.

The superannuation policy announced today is, like Labour’s capital gains tax policy, a bid to have Labour (and Goff) seen as principled, if not as charming or confident as voters seem to find a government led by Prime Minister John Key.

The capital gains tax foray was such an effort, although potentially an unhappy example. While it captured imaginations in the news media, it proved to be as much of a lead balloon with the public as conventional wisdom suggested it would.

It remains to be seen whether a higher pension age and compulsory pension savings through KiwiSaver will be treated the same way.

Certainly, recent polling suggests raising the retirement age is now accepted by a critical minimum of voters. Furthermore, the younger they are, the more accepting they are, while people in their 50s today will only suffer a few extra months in the workforce, assuming they plan to retire at all.

The government’s approach, by contrast, has been to kick this political hot potato for touch.

Key’s cast-iron commitment to keeping the retirement age at 65 or resign has been a touchstone on which he’s sought to build political trust. Like Labour, which would phase in the increase over 12 years starting in 2020, Key knows a gradual upward shift in the retirement age doesn’t need to happen straight away.

Unlike Labour, he’s happy to leave it to the next leader of the National Party to deal with the inevitable decision.

Elsewhere in the policy, Labour’s pledge to allow KiwiSaver account-holders – i.e., everyone except the self-employed and the unemployed – access to their accounts from the age of 65, rather than 67, is shrewd politics.

So, too, is the decision to wind back National’s intention to raise employee contributions to KiwiSaver from 3 percent, and leave it at 2 percent. The proposal to raise employer contributions from 3 percent to 7 percent is a hint of old-style Labour class warfare, but the party hardly counts on business owners as a support base anyway.

Other parts of the package are less compelling and bear the marks of internal arm-twisting. The proposed transitional payment system for manual workers forced to work an extra couple of years would look patronising, if it weren’t so obviously a sop to the core Labour low income vote.

Likewise, Labour is tacitly accepting that borrowing money to save it doesn’t really make sense. Rather than resume contributions to the New Zealand Superannuation Fund at the rates in place when National froze the scheme in 2009, it will ramp up contributions to around $2.4 billion in 2016.

That’s roughly the same time as the Treasury expects the government to be running a Budget surplus again, and when a National-led government would be expected to resume contributions too.

However, in an election contest where the incumbent administration has started to look just a little shop-worn, it makes sense for Labour to look bold on a problem the government will not touch.

And if being the politician who grasped the nettle on raising the retirement age becomes part of Goff’s legacy, it will be a proud part, even if there’s virtually no chance he’ll actually be Prime Minister in 2020, when the gradual upward age shift would begin, let alone 2011.

(BusinessDesk)

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