Raising pension rate to be election issue

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A number of political parties are likely to make raising the rate of New Zealand Superannuation an election issue this year.

Wednesday, January 5th 2005, 8:56AM

by Rob Hosking

Raising the level of New Zealand Superannuation to 72.5% of the average annual wage would cost an extra $1.6 billion a year once the baby boomers start to retire, Treasury says.

New Zealand First looks set to make rasing the entitlement part of its superannuation policy for the 2005 election. The party is not alone in its stance.

Participants in the Association of Superannuation Funds of New Zealand superannuation conference last year will remember that Jim Anderton’s Progressive coalition has a similar policy. United Future, although less specific, sees the current payments as a minimum, and wants to raise them over time.

Of the three it looks as though New Zealand First will make raising the entitlement the most prominent part of its election policy.

The party is already pressing the issue in Parliament, asking Finance Minister Michael Cullen for costings of raising the entitlement.

When fed through the Treasury’s long term fiscal model, an increase as advocated by New Zealand First would cost the taxpayer an extra $630 million in the first year.

That figure assumes the additional costs are met by borrowing, and include the cost of servicing that extra debt, Cullen says.

That means the net costs hits just over $1 billion annually by the turn of the decade, and by the time the babyboomers start retiring in big numbers in 2015 the extra cost is $1.6 billion a year.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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