NZ the lucky country when it comes to superannuation

OPINION

The heated discussion about superannuation - age of entitlement, generational fairness, gender equity - is a good one for New Zealand to have now.

This is a global issue that every country is wrestling with and there are no easy answers to the fiscal reality of an ageing population and prudent provisioning for a universal pension payment.

The good news is New Zealand is in an enviably good place - in terms of government finances, the performance of its sovereign wealth fund, which starts making payments to the government in 2036, and strong immigration to address declining birth rates - compared to its international peers.

But you wouldn't know it to listen to the various voices in the media. I get the distinct impression that Kiwis don't know how lucky they are.

It's fair to say there are many Australians who would gladly swap New Zealand's pension provision for theirs.

To give readers some perspective, I'm going to share some of the faults of the Australian system which are absent from New Zealand's super scheme.

Australia has one of the most complex super schemes in the world. It features a plethora of electable options that are confusing to the average person. It has provisions for insurance and for disposing of estate property, neither of which is an option in New Zealand.

This complexity is a cost on savings, reducing returns and diverting resources away from retirement income.

Australia features tight pension asset tests, as well as superannuation tax concessions, both of which are proving a bonanza for the financial planning industry, further siphoning resources away from its actual purpose.

If you want to talk about generational fairness, Australia has already implemented a gradual pension age increase to 67 years (for those born after 1 July 1952) and if the current government is returned at the 2019 Federal Election, the pension age is slated to increase to 70 years.

New Zealand's system, by contrast, is probably the simplest pension scheme in the world. There is no asset testing, you can work and continue to receive the pension, there are no electable options and there's an absence of fishhooks to indirectly benefit the financial services sector as families struggle to understand and comply with a raft of Byzantine rules.

The government has said it will raise the age of entitlement as life expectancies increase  but by international standards 67 years is a generous provisioning and it won't be phased in until 2037. Set at 65 per cent of the average wage, New Zealand's pension is higher than many other countries.

The other benefit New Zealand has over other countries is the relative absence of political meddling and 1993's multi-party accord has delivered real benefits to Kiwis via that policy stability. Changing the age of entitlement in 2037 will be the first substantive change in 44 years.

If there is a blot on Godzone's retirement landscape, it's the parlous state of private saving. New Zealand was a late adopter of workplace savings schemes and KiwiSaver, while a good start, will take time to adequately provision its citizens for gradually withdrawing from the workforce.

But that is a minor quibble. When it comes to superannuation, perhaps it's New Zealand that should be called the Lucky Country.

Alex Malley is chief executive of global accounting body CPA Australia