ACT Superannuation Policy

Goal

All New Zealanders are able to save enough during their working life to be able to comfortably look after themselves in retirement.

Background

  • 20 percent of adult New Zealanders have no savings; in fact they owe more than they own.
  • Majority of the current retired population have not saved during their working life, they depend totally on the state for their income.
  • Huge ownership (capital) divide within New Zealand society.
  • The number of workers to retirees is shrinking rapidly.
  • Taxes for superannuation and healthcare exceed 50 percent of direct personal taxation.
  • Unfunded benefits exceed 100 percent of GDP.
  • Incentives to save are poor, those showing self-reliance are often penalised.
  • To many, dependency is reality; while personal responsibility is a harsh fantasy.
  • The current system encourages many to try to get a free ride at the expense of others.
  • The aim is to get more out than we put in.
  • New Zealanders have no control over what or how their money is spent.
  • Sense of hopelessness prevails when it comes to expecting people to provide for themselves.
  • The number of people retiring each year will exceed 50,000 by 2025.

Principles

Opportunity
Enable all New Zealanders of working age to open a savings account in their own name.

Equality
Every person, regardless of family income or current circumstances (e.g. unemployed), should receive the same tax reduction/credit from the government.

Choice
Individual New Zealanders should have ownership and control over their retirement fund allowing them to accumulate wealth and, if they so decide, pass it on to their heirs.

Open marketplace
Retirement provision (income and healthcare) like any other business should be provided in an open marketplace where individual New Zealanders select the type of savings scheme best suited to their individual and family needs.

Transition
Will take into account that the change from one system in retirement to another will take 40 years and ensure that during this time, retirees' income gradually increases year by year over and above what it would be under the current system.

Realistic
Reform must be cost effective and reduce the unfunded liabilities of the current system.

Voluntary
Participation in the new system for existing workers should be voluntary, but those choosing not to join would continue to pay current levels of tax i.e. not receive tax reduction or tax credit that goes to those who do join.

Security
Benefits of current retirees and those close to retirement must be protected. Rate of return on investments made must guarantee an adequate minimum income in retirement.

Regulation
Retirement authority would approve companies wishing to enter retirement savings business.

Income
New Zealanders can enjoy a level of income in retirement greater than what is currently the case.

Policy Detail

  • The transition to the new retirement system will take 40 years when 90 percent+ of New Zealanders are expected to have sufficient savings to provide for themselves.
  • It will be available to New Zealand citizens aged 18 - 65 years of age.
  • During the transition, retirees will receive two pensions. One based on the fund accumulated via tax savings each year and the second a percentage of the existing government benefit, dependent on the number of years individual has been eligible to be a member of new retirement system. See Superannuation Policy Schedule, chart 2.
  • Minimum combined benefit during transition to be at least what people get today but in most cases will be considerably more.
  • Capital after 47 years in the workforce for those who make no drawdown on that capital would be approximately $1.8 million or $850,000 in real terms. See Superannuation Policy Schedule, chart 1.
  • Government will contribute $30.80 a week, the individual to contribute $30.80 a week and the employer to contribute $15.40 a week, therefore total savings $77.00 a week, $4,000 a year.
  • Low-income workers will be able to phase in their contribution with government top-up available.
  • Will be paid for by a mix of the following:
    • Money currently being put aside for retirement fund $2 billion.
    • Money currently being used to subsidise KiwiSaver scheme $1½ billion.
    • Interest on current fund already put aside for future retirees $1 billion
  • Must be invested with organisations that have retirement authority approval.
  • A working partner can make contributions on behalf of their partner.


If you believe that every New Zealander should be able to retire comfortably, not just the wealthy, then give ACT your Party vote, for a more secure retirement.



ACT Superannuation Policy - Schedules

Chart 1 - Superannuation - Married (both partners qualify)

Retirement Superannuation & Healthcare Fund
Contributions at $4,000 a Year Real & 5% Interest (Real) 2% Inflation)
1 Year Start Year Contribution 7% Interest Balance end year
    $4,000 Real Each Year    
1   4,000 280 4,280
2 4,280 4,080 440 8,800
3 8,800 4,160 760 13,720
4 13,720 4,240 1,110 19,070
5 19,070 4,320 1,480 24,870
6 24,870 4,400 1,890 31,160
7 31,160 4,480 2,340 37,980
8 37,980 4,570 2,810 45,360
9 45,360 4,660 3,340 53,360
10 53,360 4,740 3,900 62,000
11 62,000 4,830 4,510 71,340
12 71,340 4,930 5,160 81,430
13 81,430 5,030 5,880 92,340
14 92,340 5,130 6,640 104,110
15 104,110 5,230 7,470 116,810
16 116,810 5,530 8,370 130,710
17 130,710 5,640 9,340 145,690
18 145,690 5,750 10,400 161,840
19 161,840 5,870 11,530 179,240
20 179,240 5,980 12,750 197,970
21 197,970 6,100 14,070 218,140
22 218,140 6,220 15,490 239,850
23 239,850 6,340 17,010 263,200
24 263,200 6,460 18,650 288,310
25 288,310 6,590 21,110 316,010
26 316,010 6,720 22,360 345,090
27 345,090 6,860 24,400 376,350
28 376,350 7,000 26,590 409,940
29 409,940 7,140 28,950 446,030
30 446,030 7,280 31,480 484,790
31 484,790 7,420 34,190 526,400
32 526,400 7,570 37,110 571,080
33 571,080 7,720 40,250 619,050
34 619,050 7,870 43,610 670,530
35 670,530 8,030 47,210 725,770
36 725,770 8,190 51,090 784,950
37 784,950 8,530 55,240 848,720
38 848,720 8,700 59,710 917,130
39 917,130 8,870 64,500 990,500
40 990,500 9,050 69,650 1,069,200
41 1,069,200 9,230 75,170 1,153,600
42 1,153,600 9,420 81,080 1,244,100
43 1,244,100 9,610 87,430 1,341,140
44 1,341,140 9,800 94,220 1,445,160
45 1,445,160 10,000 101,510 1,556,670
46 1,556,670 10,200 109,320 1,676,190
47 1,676,190 10,400 117,710 1,804,300

Chart 2

(1) (2)
Plus likely capital sum earned to date
Years to retirement Age Reduction in pension Level existing pension Capital sum
Individual Married couple
1 63 Zero 100% 4,280 8,560
2 62 " 100% 8,800 17,600
3 61 " 100% 13,720 27,440
4 60 1% 99% 19,070 38,140
5 59 2% 98% 24,870 49,740
6 58 3% 97% 31,160 62,320
7 57 4% 96% 37,980 75,960
8 56 5½% 94½% 45,360 90,720
9 55 7% 93% 53,360 106,720
10 54 8½% 91½% 62,000 124,000
11 53 10% 90% 71,340 142,680
12 52 12% 88½% 81,430 162,860
13 51 14% 86% 92,340 184,680
14 50 16% 84% 104,110 208,220
15 49 18% 82% 116,810 233,620
16 48 20% 80% 130,710 261,420
17 47 23% 77% 145,690 291,380
18 46 26% 74% 161,840 323,680
19 45 29% 71% 179,240 358,480
20 44 32% 68% 197,970 395,940
21 43 35% 65% 218,140 436,280
22 42 39% 61% 239,850 479,700
23 41 43% 57% 263,200 526,400
24 40 47% 53% 288,310 576,620
25 39 51% 49% 316,010 632,020
26 38 55% 45% 345,090 690,180
27 37 59% 41% 376,350 752,700
28 36 63% 37% 409,940 819,880
29 35 67% 33% 446,030 892,060
30 34 71% 29% 484,790 969.580
31 33 75% 25% 526,400 1,052,800
32 32 79% 21% 571,080 1,142,160
33 31 83% 17% 619,050 1,238,100
34 30 87% 13% 670,530 1,341,060
35 29 91% 9% 725,770 1,451,540
36 28 95% 5% 784,950 1,569,900
37 27 99% 1% 848,720 1,697,440
38 26 100% - 917,130 1,834,260

Note:
(1) Retiree cannot get less than what they receive today.
(2) Full health support in retirement given to people in this category.

(1) Sets out the reduction in existing government pension that will take place dependent on the number of years you have until your retirement.
(2) Sets out likely capital sum you will have available to you from your superannuation savings.