Ongoing Reviews/Reports on NZ Super & Portability

Early in 2006, John Armstrong, political columnist with the The New Zealand Herald, slammed the present government: “There is more than a smattering of truth in the suggestion that the ‘review’ option has become the default option for the Labour-led Government…There hardly seems to be a ministerial portfolio where some aspect of policy or operational procedure is not subject to some review of some kind…Confidence and supply agreements…are filled with intentions to ‘review’ this and ‘investigate’ that - the language of compromise.”

The cynic might say that reviews are what you do when you have no real intent to carry out reforms.  Consider the following:

The first two Reviews of Superannuation and Portability were completed and delivered to Parliament House in November 2001 and February 2003 respectively.  Both reviews were rejected.  MSD and Treasury officials, having been directed to “provide further advice”, completed and delivered a third review to Dr Cullen and Mr Maharey in May 2004.  The third review was also dismissed, the two Ministers specifically instructing their officials to go back to the drawing board and “work on a more modest range of options.”  It is believed a fourth review/report was prepared and submitted in May 2005.

The latest review/report was commissioned for completion by February 2006, with firm proposals to be submitted to Cabinet before the end of the first half of 2006.  We have had similar expectations before, almost five years ago in fact.

It remains to be seen whether the current Government will require more reviews to complete its deliberations.  Recently, the Department of Labour, the Ministry of Women’s Affairs and Veteran Affairs New Zealand have been brought in to supplement the original six government departments involved in preparing these reviews.  The scale of work involved over the past six years and the cost to the taxpayer will never be made known.  What is known: at no stage has Grey Power or any migrant community (except the Ministry of Pacific Island Affairs) been consulted.

Following the leakage of the comprehensive February 2003 Review, all subsequent reviews/reports have been shrouded in secrecy.  The Official Information Act has not availed even the Ombudsman.  Though the Ministers’ reasons for withholding them are transparent enough, no one has been able to access the documents themselves.

However the February 2003 Review says everything that needs to be said – an observation echoed by some of the nation’s more astute politicians after reading the copies of the review that were sent to them.  (The first politicians to receive copies of the review were Winston Peters, NZ First, and John Key, National.)  Had it not been for a fortuitous error, the February 2003 Review of Superannuation & Portability would never have become available and all other political parties and the public would still be completely in the dark.

We now know exactly what the government’s advisors were telling the government it needed to do in order to provide the nation with a fair and equitable retirement program.  The February 2003 Review proposes a logical resolution designed to end the discriminatory nature - and the financial disadvantages - of New Zealand’s current retirement policies.

The Package A Option (a proportional system) outlined in the review is the option most highly recommended, providing the most feasible solution to the problems affecting NZ Super and in line with systems tested and preferred by nations around the world.  At the same time the review stresses the need to include safety nets to insure that the most vulnerable members of society are not disadvantaged.

In a democratic society, discrimination - in any form - is unacceptable.  The review describes Section 70 as unfair and discriminatory and advocates the immediate discontinuation of the direct deduction policy.  The abolition of Section 70 would open the way to social security arrangements with countries enjoying high pension rates.  The review emphasizes that a social security agreement with the United States should be treated as a major objective and calls on the NZ Government to remove the obstacles to such an agreement.

The proposals advanced in the review would not weaken but strengthen the current system.  One of the most striking features of the review is the assertion that, as a result of extensive research, the proposed changes are calculated to save the country money.  If a review proposing changes to the state retirement program provides equity, stability and sustainability and costs less to operate, how can we settle for anything less?

In dismissing the February 2003 Review and calling for ever more reviews, it is apparent that the Ministers are not interested in proposals to end the discriminatory nature of NZ Super.  In discussing the reviews with party colleagues, the Minister of Social Development refers to the content as “advice” - however to inquiring pensioners he denies the reviews contain advice/recommendations but “an analysis of options”.  The Minister has openly stated his intent not to discontinue the much-hated direct deduction policy but to “modernize it”, and he has candidly admitted to requesting “more modest options…not likely to please some people”.

These admissions are ominous and signal that the Ministers are only interested in watered-down compromises, with the real intent of putting more money back into the government’s coffers. 

Examples of the Ministers’ justifications for dismissing the recommendations of the February 2003 Review include:

The proposals would not advantage the majority, or even a significant minority.

New Zealanders cherish NZ Super in its present form and are opposed to change.

The proposals ignore the continuity of the present system’s evolution over nearly 70 years, and the clear preferences that have been expressed when the electorate has been consulted in the past.

None of the leaders of other political parties have made representations to the government in support of changes.

In the last referendum New Zealanders voted overwhelmingly against changes to NZ Super.  (In truth, they did not vote against changes per se – they simply didn’t like the changes advocated by Winston Peters.)

The proposals fail to take care of the most vulnerable members of our society.

The most vulnerable members of our society, in particular, are not pressing for the repeal of Section 70.

The proposals sacrifice the advantages of the current system.

The proposals are not financially viable.

The proposals fail to consider the in-built limitations necessary for New Zealand’s unique non-contributory, universal, flat-rate pension scheme to remain financially viable.

The cost involved in administrative change would be too high.

Unfortunately for Cabinet Ministers, now that the review has become available people are no longer fooled by such rhetoric on superannuation issues.  Decoded, the clear message reads:

“You are an insignificant minority challenging a beloved Kiwi icon: real New Zealanders are not supporting you.  The present system has been part of this country longer than you have.  You are being selfish and thoughtless in proposing to squander the many advantages of the current system.  Yes, it does have in-built injustices but they make it cheaper to operate.  Any changes would cut into our surplus.”

On June 29, 2006, following complaints lodged with the Office of the Ombudsmen, the Minister for Social Development finally agreed to release the May 2004 Report on NZ Superannuation Portability for public scrutiny.  The Minister dismissed the report as being unacceptable to his predecessor and therefore historical in nature and largely outdated. 

Nevertheless, more than half the pages of this document had been removed.  In many instances, large sections of the pages supplied had been blacked out.  Mr Benson-Pope justified his heavy-handed censorship with the following:

“Disclosure would be likely to prejudice the security or defence of New Zealand or the international relations of the Government of New Zealand.  Release of the information at issue will harm diplomatic relations as the countries potentially affected have not to date been consulted as part of this area of the review."

Similar humbug was used to justify the concealment of the February 2003 Report.

From the material on view, the 2004 Report appears to be largely a repeat of the February 2003 Report – with added emphasis given to previous major recommendations.  A fourth package of options (Package D) has been added that will modify, but nevertheless retain, the widely condemned direct deduction policy.

A significant feature of the May 2004 Review is that for the first time ever, an official document admits that the government's retirement policies have resulted in a huge volume of complaints. 

The government is reminded that NZ Superannuation in its current form is unsustainable and that failure to address the problems now risks a more costly and a more complicated resolution at a future date:

“New Zealand’s policies on payment of NZ Super overseas and of overseas pensions into New Zealand are out of date and inequitable.  We are significantly out of step with the ‘seamless’ provision of social security adopted in Europe and many other countries overseas, which impacts negatively on other NZ Government priorities…”

Last modified: February 21, 2007