Presumably someone pointed the Retirement Commissioner to my post yesterday ,as I gather the online version of the triennial report now has a “Foreword”, rather than the “Forward” that appeared until yesterday.  We all make mistakes, typos, and literals, but you’d suppose that well-funded government agencies would have prominent parts of high-profile documents proofread.     Anyway, enough of that (perhaps rather petty) point.

One other aspect of the Commissioner’s report that caught my eye was the bit about “ethical investment”.  This was prompted by the government, which had asked the Commissioner to report on

Information about the public’s perception and understanding of ethical investments
in KiwiSaver, including:
a) The kinds of investments that New Zealanders may want to see excluded
by KiwiSaver providers; and
b) The range of KiwiSaver funds with an ethical investment mandate.

 

As I noted yesterday, there is a make-work element to the Commissioner’s role (and his supporting office, the so-called Commission for Financial Capability).  You might have supposed that firms operating Kiwisaver schemes, or attempting to sell their products to managers of Kiwisaver funds, might be best placed to work out what, if any, investments “New Zealanders” didn’t want to invest in.  It is a (potential) marketing opportunity, and one the providers are strongly-incentivised to tap.  They also get to experiment, and see which products actually attract (or turn off) savers –  revealed preference often being quite different than (say) idle costless, perhaps even virtue-signalling, response to surveys.

Strangely, the Retirement Commissioner starts this section of the report by mischaracterising the terms of reference

In term of reference five, the Government asked us to provide information about the public’s perception and understanding of ethical investment.

Except that (see above) that wasn’t what was asked for at all.

Anyway, they commissioned a report from consultants at KPMG.  KPMG appear not to like the notion of “ethical” investment, and prefer “responsible investment” instead.    I guess if you poll people and ask if they want “responsible investment” you’ll probably get 100 per cent saying yes.  It all rapidly becomes rather empty –  your “responsible” is, often enough, my “deeply corrosive”, and vice versa.  You can read the KPMG report and all the discussion of how funds can/do try to take account of ESG (environmental, social, governance) considerations.  But there isn’t really much there –  in my observation (as trustee of a couple of funds)  much of it is marketing hype.  Perhaps the one bit of the KPMG report that caught my eye.

The key sentence is that one just above the table.   It (and the data in the table) do not make into the Retirement Commissioner’s report.

The Retirement Commissioner’s report then moves on to public opinion noting that

In addition to the KPMG work, CFFC includes ethical investment in its own regular surveys of the public.

There is a footnote there to this internal note, but unfortunately there is no link to the full results of the poll, including either the exact wording of the questions or the respondent comments (selected ones of which are quoted in the report, but with no way to judge how representative these observations are).

They are keen to talk up the results

From this, we know that ethical investment is important to the majority of
respondents, with only 26% of overall respondents, and 18% of contributing KiwiSaver members, stating that they are NOT interested in ethical investment.

Actually, I was little surprised that 18 per cent of respondents were prepared to tell a survey taker that they had no interest in an ethical approach to their investments.  But just saying it just doesn’t mean much.

Anyway, this was the main table on specific types of industries (although it isn’t clear whether respondents were prompted –  I’m guessing so –  with this particular list, or whether everyone came up with their own preferences).

The Commissioner writes about this table thus

We also know that:
• In terms of which investment most want excluded from investments, animal cruelty, worker exploitation, whaling and pornography top the list, with over 70% of
respondents agreeing these are exclusion priorities.

But without knowing the precise wording of the question, we can’t even be sure that is right. The Commissioner seems to interpret the results as meaning people don’t want to invest in these industries, but the description in the table suggests the question might have along the lines of “if there were an “ethical investment fund which industries should be excluded”.  They are two quite different things, as revealed preference seems to confirm.  It is, for example, hard to believe that 43 per cent of New Zealanders really don’t want beer or wine company shares in their Kiwisaver investment –  it not being 1918, and the near vote for Prohibition, actual teetollars being probably no more than 20 per cent of the population.  But perhaps they think it is what an “ethical investment fund” might exclude?  And since parties supporting disbanding the military are notable by their absence, one might also be a little sceptical about what people actually had in mind –  feel-goodness apart –  in their weapons answers.

(There is some interesting demographic data, notably that in all the categories above women were more likely to favour exclusion than men.)

Then it starts to get a bit awkward

A majority of respondents are satisfied with available ethical investment options within KiwiSaver and of those contributing, 70% are satisfied with the range of ethical investment options.

This high level of satisfaction is a surprise because most ethical investment funds do
not meet the expectations reported by survey participants.

But perhaps not so much, because in the internal research note –  but not in the published report –  we find this

However, only a minority selected ethical investment when asked about the criteria for selecting a fund. A possible explanation is that respondents show social desirability bias (select the “right” answer) when asked about ethical investment directly, but their actual behaviour shows limited consideration of ethical investment in KiwiSaver funds.

Revealed preference seems to be that the public don’t really care much at all (and/or, it might be hard/costly to evaluate funds for your own preferences).

But despite all this, the one recommendation in this section of the report is

PUBLICLY FUND MINDFUL MONEY TO ERASE ANY POTENTIAL CONFLICTS
OF INTEREST: INTRODUCE TAXPAYER FUNDING FOR MINDFUL MONEY TO GUARANTEE THE CHARITY CONTINUES TO PUBLISH UNBIASED, RESPONSIBLE INVESTMENT INFORMATION.

Of Mindful Money

Mindful Money is a charity that promotes ethical investment, and was recently
launched (September 2019) in response to the public demand for more knowledge
and options to invest ethically. Mindful Money’s mission statement is to: ‘empower
investors and make investment a force for good. Over the next five years we aim to
switch $6 billion of investment funds away from pollution, exploitation and inequality towards a low emissions, sustainable and inclusive economy.’

It is run by someone who was a Green Party MP until the last election.

So, the public show little practical sign of caring very much, civil society has set up its own entity (which has managed to attract some commissions for referrals) and yet one well-funded government agency’s proposal is that yet more public money should be pushed in the direction of this charity.

As they recognise, simply funnelling money to one brand-new private charity would be unusual

While conscious that the regular process would be to go to tender first, we think in
terms of efficiency and cost, and considering that the public want information now so that they can make informed choices that align with their personal values, funding Mindful Money is the most efficient and simple step for the Government to take.

Oh well, never mind about good process, or whether Mindful Money might just be channelling a particular subset of distastes….toss them some public money.  Barry Coates must have welcomed the report.

As I noted at the start, the Retirement Commissioner was landed with this particular term of reference, so they had to write something.   But how they responded was up to them, and it simply wasn’t particular thoughtful or rigorous, more about how do we get on the bandwagon.

In truth, ethical investment is hard, and something of challenge to each of us as to how much we care about particular issues.     Personally, if I were buying company shares directly, I would refuse to purchase companies operating in the small handful of the sectors listed in the CFFC table above (gambling, pornography, and –  depending on definition – animal cruelty).  But there are plenty of other activites I would also refuse to invest in (including hospital companies providing abortions, any PRC company, companies that actively facilitate the interests of the worst regimes on the planet –  including the PRC).   That is easy to say, and actually fairly easy to do.

But once you get into collective investment vehicles –  where the diversification gains and low transactions costs (and even PIE tax rates) are very real advantages –  it quickly becomes very difficult.  For example, much of my retirement savings is in a scheme I joined –  as a manadatory condition of service –  almost 40 years ago.  My ethical views aren’t necessarily those of other members, and even though I’m a trustee of the scheme I have legal constraints on my ability to make what seem like ethical choices to me (and that is probably as it should be).  I’d find it all but impossible to find a Kiwisaver vehicle offering my list of exclusions –  and, on the other hand, I’m very happy to have an interest in shares in arms companies, oil companies etc –  and so, in practice, I do not do anything about the issue.  I’m a trustee of another pension fund –  where there might actually be some commonality of ethical preferences among members –  but even then it is difficult to get members to reveal those preferences consistently and (again) legal constraints.

But all of these issues are yet another reason why I favour winding up the New Zealand Superannuation Fund.  Holding a particular Kiwisaver fund is strictly voluntary (you might not find an ideal fund, but there is quite a bit of choice), but your exposure or mine to the assets held in the New Zealand Superannuation is inescapable.  They like to boast about what “responsible” investors they are, but all that really tells you is that they line up with the personal political/ethical preferences of Matt Whineray and his Board (or Adrian Orr before that).   We simply should not have money coercively taken from us and invested in causes and companies we individually find distasteful, even reprehensible.   That is true whether your burning concern (so to speak) is fossil fuels, pornography, marijuana, abortion, the whales, or whatever.  There is no compelling public policy case for the fund, and the way its investment policy trespasses – ignores – the ethical preferences of many citizens  simply further undermines that case.

Some thoughtful discussion of issues like that might usefully have found a place in the Retirement Commissioner’s report.  It didn’t of course.   Some hardheaded analysis of just how much people really valued “ethical investing” might have made it into the report.  But it didn’t either.

It was a pretty disappointing report all round.

 

How the years fly by.  My youngest child headed off to high school for the first time this morning.  Only five years of the school system to go.

But it was the other end of the age spectrum I wanted to write about today, in particular the recent report of the Retirement Commissioner (in this case the interim one), reviewing –  as required by law to do  –  retirement income policies.    Very conveniently for a government going into an election with the key party (Labour) campaigning against (its own previous policy, not that many years ago) any idea of raising the age of eligibility for New Zealand Superannuation, the Interim Retirement Commissioner has come out in support of that conclusion.  Apparently, according to Mr Cordtz, the age that was chosen in 1898 –  when the new age pension was hard to get –  is still appropriate into the indefinite future now when (a) health standards are so much better, (b) most jobs are less physically demanding, and (c) the benefit is universal.   Take a look at theterms of reference for this latest review and it looks as though the government was looking to the Commissioner to steer away from any suggestion that raising the NZS age might be a good idea.  So they will be pleased –  not so much by the substance of the report (there isn’t much there) as by the headlines, which are all most will see.

I’ve never been persuaded that taxpayers get any real value out of having a Retirement Commissioner, or the supporting staff in the “Commission for Financial Capability”. That has been so whether or not, from time to time, I might have agreed or disagreed with particular suggestions they were making.    It is a classic make-work bureaucracy, costing quite a bit of money, serving no useful purpose, and typically run by people with no particular relevant expertise, other (presumably) than appealing to the government of the day.  That was true of the previous troubled Retirement Commissioner (who seemed to know about marketing), the current Interim Retirement Commissioner appointed by the current government who seems to know quite a bit about rugby league, and also of the incoming commissioner Jane Wrightson, whose expertise seems to consist in getting a succession of small government chief executive roles.   The money spent on this body could almost certainly be more effectively spent…..almost anywhere in government (health, educations, statistics, whatever).  And at very least it is time to rethink whether we really need a triennial report on these issues (as I noted in a previous post, Parliament should also revisit the current statutory requirement for a Long-Term Fiscal Statement every four years).

But if one is going to write about a report one should actually read it.  Perhaps the low point of the entire document was the Interim Retirement Commissioner’s opening statement.   It was headed “Forward”, but I have to assume he really meant “Foreword” –  especially as he ends his comments  with a pithy quote

“I walk backwards in the future, with my eyes fixed on the past”

that seems singularly inapt when even the government’s terms of reference asked the Commissioner to focus on the future.

Much of the “Forward” reads like something a zealous 22 year old might have written, but which his or her boss would have sent back for a rewrite.  The Retirement Commissioner had no boss, no Board (for example) to which he was accountable.

And so we read

In approaching this review as Interim Retirement Commissioner, I have of course brought my own views and experience to bear, which are naturally different to those of previous commissioners – and no doubt, of future ones also. I come with perhaps less direct experience of the inner workings of government or of the financial sector than some previous commissioners, but believe I have brought a more hands-on view of how a diverse array of lower income and vulnerable New Zealanders experience material hardship.

So, he’ll be out of the job again in a few weeks, knows little or nothing about the policy issues, but he has apparently had a bit to do with poor people.

Then we get a rant about how in his view differing average life expectancies  of Maori and other New Zealanders is somehow a breach of the Treaty of Waitangi.  Err, but…

But I am also aware it is not the role of the Retirement Commissioner to make
findings about breaches of the Treaty, and accordingly my recommendations focus on improving the system for all New Zealanders.

Might have been better to skip the rant then.

Then we get a little essay (“A Note on Language”) about how uncomfortable he is with the term “retirement”, but is constrained by the Act and has to use it to some extent.     It seems never to have occurred to him that an age benefit might originally have had in mind people who were doing exactly that –  retiring –  generally because they had got to the point where it was physically difficult to work.   The fact that “retirement” might not describe the experience now of many 65 year olds should probably be a hint that we shouldn’t be paying a universal welfare benefit to everyone at 65.  But Mr Cordtz shows signs of being keen on a UBI, so I guess that thought didn’t cross his mind.

Then we are told that “NZ is good value”, and with a dig at his predecessors, Corditz claims to offer “a more nuanced point of view” than they did –  this despite earlier suggesting himself that he limited expertise in this area.   He quotes a net fiscal cost of NZS, and then a few lines later goes on to claim that there is a significant offset to the NZS cost because NZS recipients pay tax on their NZS (hint: that is how you get to net numbers).

The benefits abound apparently

NZS also enables many NZ Superannuitants to undertake unpaid, voluntary work in their community. This is a huge contribution relied on in many communities and which should be accounted for in considering the costs and benefits of NZS.

Well, no doubt, except that as he noted lots of people  in their late 60s are still in paid work, and more would be if the NZS age was raised.  There are benefits in paid work too, including in the additional tax revenue.  And the relevant debate isn’t whether we should have an NZS but whether it should be all-but universal at 65, even as life expectancy has increased a lot.   And there is no hint from the Interim Retirement Commissioner that he recognises that NZs universal at 65 also helps to pay for more than a few European holidays in New Zealand winters (probably quite a few good quality European cars as well).

I”m pretty sure that not once in the report did I see any mention of the trend in so many other OECD countries to raise the age of public pension eligibility beyond 65.  And while there are repeated references to how NZS lifts the material living standards of quite a few people who transition onto it (NZS is paid at higher rate, and with fewer conditions, than other benefits), this is presented as a good thing, rather than as incidental feature of a universal system.  You get the impression that Mr Cordtz would be a champion of higher benefits all round.

Now, I’m not suggesting that are no useful –  if unoriginal  –  lines in the report.  Ruinous land use and housing policies are making things ever harder for a ever-larger proportion of the population, including now the newly-old. But it isn’t as if the Retirement Commissioner has anything useful to add to debate around the best policies in that area, other than more roles for government.   And there is little or no rigour in what is there. The report touches on growing life expectancy, but offers nothing on (for example) ideas for sharing the gains of life expectancy increases by progressively (but not necessarily fully) raising the state pension age.   And it barely mentions at all issues around the easy eligibility for NZS of people who haven’t spent much of their working lives in New Zealand (whether migrants or New Zealanders working –  and paying taxes –  abroad).

And, as it happens, I don’t totally disagree with Mr Cordtz that fiscal considerations alone do not compel us to change our NZS policy.  We could afford to keep the system as it is.  But we shouldn’t do so.   Here was the last few paragraphs of a post on these issues late last year

As for NZS itself, personally I’m not overly interested in arguing the case for reform on fiscal grounds but on a rather more moral ground.    Even if we could afford it, even if there were no productive costs from the deadweight costs of the associated taxes, there just seems something wrong to me in providing a universal liveable income to every person aged 65 or over (subject only to undemanding residence requirements).    45 per cent of those 65-69 are now in the labour force –  suggesting they are physically able to work –  which is substantially greater than the 30 per cent of those aged 60-64 who were in the labour force 30 years ago when NZS eligibility was at age 60.

I don’t consider myself a welfare hardliner.  I think society should treat quite generously those genuinely unable to work, especially those who find themselves in that position unforeseeably.  Old age isn’t one of those (unforeseeable) conditions, but personally, I have no particular problem with something like the current flat rate of NZS, or even of indexing it to wage movements (which would be likely to happen over time anytime, whether it was the formal mechanism from year to year), from some age where we can generally agree a large proportion of the population might not be able to hold down much of a job.  I don’t have a problem with not being overly demanding in tests for those finding work increasingly physically difficult beyond, say, 60.   But what is right or fair about a universal flat rate paid – by the rest of the population – to a group where almost half are working anyway?  It is why I would favour raising the NZS age to, say, 68 now (in pretty short order) and then indexing the age in line with further improvements in life expectancy, and I’d favour that approach even if long-term fiscal forecasts showed large surpluses for decades to come.    At the margin, I’d reinforce that policy change with a provision that you have to have lived in New Zealand for 30 years after age 20 to be eligible for full NZS (a pro-rated payment for people with, say, between 10 and 30 years of actual residence).  Why?  Because in general you should only be expected to be supported by the people of New Zealand, unconditionally, in your old age, if most of your adult life was spent as part of this society.

Reasonable people can, of course, debate these suggestions.  But they are where I think the debate should be –  about what sort of society we should be, what sort of mix between self-reliance and public provision there should be, even about what mix of family support and public support there should be, or what (if any) stigma should attach to be funded by the taxpayer in old age –  not, mostly, about long-term fiscal forecasts.

And it doesn’t seem as though the Retirement Commissioner –  interim or otherwise –  has much to add to those inherently political, even moral, debates.   The latest report seemed particularly poor, but I guess it (those headlines) will have been welcomed in the Beehive.

In truth, the Treasury’s Long-Term Fiscal Statement –  due, I think, in March –  is also not likely to add much new, but it is at least likely to be a bit more rigorous.  And if there is an opening comment from the chief executive, the title is more likely to be Foreword.

 

When there isn’t much, if any, political or community impetus to do anything about a looming issue, it can still be useful to be told that the sky isn’t falling –  at least if that analysis is correct – but it probably isn’t an approach likely to attract too many readers.

The New Zealand Initiative last week released just such a report on New Zealand Superannuation, under the (slightly laboured) title Embracing a Super Model: The superannuation sky is not falling. (I was among those who provided comments on an earlier draft of the report.)

There are lots of interesting charts, even if perhaps most are familiar to anyone who has been reading in this area.  And there are helpful reminders of the (very) good features of our NZS system

There is a lot to like about the NZS model:

• Low poverty rates: The material hardship rate for the elderly is low compared to other groups in New Zealand and is one of the lowest compared with European countries. The standard hardship rate for superannuitants is 3%, compared with 11% for the whole population and 18% for households with children.
• Relatively affordable: NZS is more affordable than public pension schemes in many OECD countries, both today and in 2050. At around 8% of GDP, the projected public expenditure on NZS in 2050 is still lower than what many OECD countries are spending today. These include oft-acclaimed systems like in Denmark, Finland, Norway and Sweden.
• Simple and efficient: NZS does not distort incentives for employment and savings as much as means-tested systems. When an NZS surcharge was introduced from 1985 to 1998, people went to great lengths to avoid paying it by hiding their assets. The simplicity of a universal benefit also lowers administrative costs.

(although, as I noted in a post a few months ago some OECD data appear to raise questions about those relative poverty rates.)

Our system has the further merit, at least in my view, that it explicitly focuses on providing a modest level of income support, leaving the responsibility for any higher material standard of living in old age a matter for individuals and families.  (Having said that, the tax system we have had in place since 1988/89 –  taxing income on savings made out of after-tax income at least as heavily as income from labour –  is quite out of step with that particular vision.)

When it comes to recommendations for change, the New Zealand Initiative report is curiously bloodless.  I agree with some of their recommendations, disagree with others, and noticed an important omission.  But with no sense of any fiscal urgency, the author seems a little at sea.  For my tastes, there was a missing moral dimension – a sense of right and wrong.  Debates about how we care for our elderly seem almost inescapably moral in nature.  Of course, economists have little or nothing distinctive to add in that area, but the Initiative seems reluctant to even attempt to make a case.

Their first recommendation is one I’d agree with

Recommendation 1: Link the pension age to health expectancy

Doing so would save some money –  potentially quite a lot of money over time.  But to me, the stronger argument isn’t about saving money per se, but about a sense of right and wrong.    In an age when most people aged 65 are perfectly capable of working –  thanks to the changing nature of jobs and the improvements in the health status of people –  what possible case can there be for paying a near-universal living allowance, raised by taxes with all their deadweight costs, to everyone of that age?   No one argues –  the Initiative certainly doesn’t –  that people who are physically unable to work should have to, but that is true of people at any age (it is why, for example, we have the Invalids Benefit).   I also don’t have a problem with society agreeing that it doesn’t expect people past a certain age to provide for themselves (or within families), unless they particularly want to work.  But given the health status of most people aged 65 how can 65 possibly be the appropriate age now?   As a chart in the report illustrates, more than 50 per cent of men aged 65-69 are still in the labour force.

I’m much less convinced by the second recommendation

Recommendation 2: Index NZS to CPI only rather than both CPI and wages

• NZS is indexed to both inflation and the average ordinary time wage. Decoupling NZS from rises in wages is a way of ensuring productivity gains reduce the costs of NZS. The real purchasing power of NZS should remain the same while the real purchasing power of wages would increase.

Although it isn’t quite stated this way, this recommendation is an assertion that the relative living standards of a large chunk of elderly New Zealanders are too high (for the bottom four deciles of the over-65s, NZS makes up almost their income).  It is to guarantee a material increase in the relative poverty rate of older New Zealanders, substantially so over, say, a 20 or 30 year horizon. In fact, what would be likely to happen is that a whole raft of means-tested forms of assistance would be added to the system, detracting from one of the great strengths (see above) of the current system.  Also, even if the analysts recommending CPI indexation rather than wage indexation are willing to live with the full ramifications of such a system  –  in principle, 100 years from now the real value of NZS would be the same as now, even though real wages might be several multiples of what they are now –  the political system just won’t do so.   Break the link to wages now, and it is likely to be back a decade from now.

(One plausible compromise recommendation might be to lock in the real purchasing power of NZS at the point a person first receives it –  eg you might get 65 per cent of the average wage as it was when you turned 65 (or 68) –  and the person turning 65 (or 68) five years hence would get 65 per cent of average wages then.  Both would only be CPI-indexed from there forward, but future old people would get to share in the productivity gains the community manages to secure.  This approach would parallel how private defined benefit pension schemes work.)

What of the third recommendation?

Recommendation 3: Contributions to NZ Super Fund should not be at the expense of paying down debt

The Super Fund should not be relied on to reduce the future costs of NZS (it cannot do that), and contributions to the Fund should not come at the expense of paying down debt.

I get the impression that the New Zealand Initiative isn’t very keen on the New Zealand Superannuation Fund, but is reluctant to call a spade a spade and call for its disestablishment.  There is an analytical point to be made-  NZSF doesn’t materially affect the future affordability of NZS –  but there is an at least equally important debate to be had about whether runnning a highly-leveraged (wholly leveraged) investment fund trading world markets –  and making politically convenient plays whether around climate change, light rail, or whatever – is any sort of natural or appropriate role for government.   I don’t think so, and I doubt the Initiative does either, but they seem strangely unwilling to say it (I guess they want to keep on good terms with the government).  Note that the existence or not of the NZSF is a different issue from the question of whether governments running a welfare system, especially for old people, should also run much lower levels of net debt (even net assets) than some stylised government doing only law and order and infrastructure might. I think they should.

And what of the fourth recommendation

Recommendation 4: Productivity growth will make NZS – and everything else – more affordable

Faster rates of productivity growth relative to increases in the real interest cost of government borrowing can allow increased government spending without falling into a public debt spiral. Raising productivity growth is a way of making NZS (and everything else) more affordable, and gives future governments more options and flexibility to adjust to changing economic and political circumstances.

Well, of course, although on the narrow NZS point this is a less-strong argument than it appears.  When net debt is near-zero, debt servicing costs aren’t a particularly important consideration.  The Initiative argues for CPI-indexing partly so that productivity gains will improve the fiscal position, although that seems to me to put the emphasis in the wrong place.  Faster productivity growth –  and recall that ours has been lamentable for decades –  offers the prospects of better material living standards for almost everyone  including, as they note, flexibility about support for the elderly.

But in practice, this isn’t so much a New Zealand Initiative recommendation as an aspiration.   We’d all prefer that productivity growth had been, and would be in future, faster. But wishing it doesn’t make it so, and the Initiative hasn’t been particularly strong on identifying the key factors, or policy issues, that might explain that failing and offer credible New Zealand-focused pathways out of it.

Finally, turning back to NZS itself, it was striking that –  as far as I could see –  there was no discussion in the report of the rather weird aspect of our system: that in a country with so many immigrants and emigrants, we offer a universal benefit to anyone who has lived in New Zealand for 10 years after turning 20, including 5 years after turning 50.  It is made worse by the fact that we have Social Security Agreements with various countries, notably Australia and the UK, which mean that residency in those countries counts as residency in New Zealand for NZS purposes.  Is this affordable?  Perhaps so in the same sense the New Zealand Initiative notes that the overall NZS system could be afforded. But is it right?  Well, that seems like a moral question –  informed no doubt by analysis –  and one where I’m pretty clear what the answer should be. It is simply wrong.

Welfare systems should be about “looking after our own”, and if you went to Australia at 20 and spent your entire working life there, I don’t see any good reason for New Zealand taxpayers to support you back here in retirement (of course, we don’t know how material these numbers might be).  Or if you happened to come to New Zealand first at 55.    A graduated system, in which NZS payments are proportional to the time spent in New Zealand between 20 and 65, seems both fair and fiscally prudent.   Take the 10 year residency (real residency) as a starting point at which you might get, say, a third of the standard NZS at 65, and scale it up so that after say 30 years you get the full benefit.  (Will there be a few hard cases? No doubt, but that is where charity and family support should be expected to fill the gaps.)

It will be interesting to see what, if any, NZS policy the opposition National Party comes out with.  The previous government, at the very end of its term, and having changed leaders, did promise to phase in –  very very slowly – an increase in the NZS eligibility age to 67.  But only if they were re-elected, which they wern’t.  And doing nothing about other features of the system –  dealing with any life or health indexation (in full or in part) –  or the very short residency requirements.  With Labour and New Zealand First seemingly fully committed to the current parameters of the system, it would be a brave Opposition to campaign for change, especially from a party with little obvious sense of an ability to engage on matters of right and wrong.   One should probably never wish for a recession –  especially now given the limited capacity of the authorities in so many countries to respond –  but perhaps it will take a recession to get our leaders to more seriously address the NZS issue.  That was, after all, what it took in 1989 and then 1991 when Labour started, and National greatly accelerated, the move back to 65.