Pensive about the pension

Godfather of the user-pays system Gareth Morgan has been chirping recently about introducing means testing for the pension. As he is about to join the august ranks of the time-to-retirees, he tells us he is wealthy enough to not need the pension and as far as he is concerned, there are too many in that position.

Now, lets look at how the government perceives means testing. It comes with two components - financial and asset.You can't split them. So, if a couple bought a property on a dirt road in Papamoa on the beach front for $5000 (pounds back then) in the 1950's and live in it as retirees with just a pension for income, they would have an asset worth say, $2 million in today's times if the section was never subdivided. But - they only have the pension as income. Where does Mr Morgan's lofty ideals leave them then? Absolutely up the creek. Why should they have to sell their long term family home - and these days, at least a quarter of the funds would have to be for another house anyway.
The point is however, they should not have to leave the home they have known for the past 50 or 60 years. Tradition, family, all the things that are important to us as kiwis are tied up in that philosophy.

Let's look at the pension itself. Brought into law in 1898, it was a universal (meaning non-means tested) benefit for those over the age of 65. In 1938, when the Social Security Act came in, it was changed to include means testing between the ages of 60 and 65, where it reverted back to universal.
In 1975, Labour, always thinking ahead, introduced a compulsory retirement scheme whereby everyone put in 4% of their gross wage. Labour lost the election the following year and in 1977, Muldoon axed the scheme and changed the way the pension was paid, so that people received 80% of the average wage. (This was later changed to 65% and then Labour upped it to 66% where it remains today). Between the years of 1993 and 2001, the pensionable age was raised from 61 to 65, where it currently is today.

The Cullen Fund, a colloquial name given to a retirement fund of Labour's then finance minister Dr Michael Cullen, was set up in 2001. Partially pre-funded by the government, it remains today the biggest monetary asset the government has, cushioning us against the global recession in 2009 and having a record return for a fund of its size for 2012 with a 25.8% return.

Kiwisaver was also introduced by Labour in an attempt to help kiwis learn how to save for their retirement, with grumblings from economists of the babyboomers being too many for the country's coffers to cope with when we all started retiring in the millennium and beyond.

When we couple this with the figures that over their working lifetime the average household pays $1.48 million in taxes (figures sourced from the NZ Taxpayers Union), and can virtually claim nothing whatsoever of any value each year from tax returns, we've paid our way to have a universal pension that is not means tested. Indeed, there is a global push these days to provide a universal benefit to everyone, simply because technology is growing to such an extent that working for a living will become a thing of the past for the vast majority within the next 50 years. My point here is, our pensioners have absolutely paid their dues. Their hard work and in many instances their sacrifices,
is what has got us to this point. If we as a wider community cannot look after them - even if they don't need it - then it says an awful lot about how badly our humanity has slipped. As a community should bring up a child, so too should the community succour its elderly.

So why would a man like Gareth Morgan suddenly pipe up and start spouting about means testing the pension? Between the Cullen Fund, for us not-quite-there-yet retirees and Kiwisaver for those in the prime of their life or younger, and then the push for universal benefits for us all, we are all well insulated for our later years.

Perhaps Mr Morgan needs to pick up the spade of retirement and stick to the garden.