A guest post on Kiwiblog by Michael Littlewood:
It’s difficult to compare countries’ retirement income systems but, in a new report, I have tried, as I describe the differences and similarities between New Zealand and Australia. We hear a great deal about Australia, probably because most of our financial service providers are Australian-owned and their own incomes reflect funds under their management.
The comparison is worth the effort because the clamour for a compulsory version of KiwiSaver usually draws on the superficially stunning success of Australia’s ‘Superannuation Guarantee’ scheme. Compulsion has been very kind to the retirement saving industry, so we understand why players on this side of the Tasman might want to repeat the experience.
How many times have you heard the A$4 trillion mantra? In fact, superannuation schemes in Australia now own about A$4.5 trillion, while our own KiwiSaver schemes have just NZ$138 billion. The comparison is apparently damning.
However, there is much more to the story if we want to understand what’s really happening under the hood.
Australia’s compulsory system has transformed how household wealth is packaged there: superannuation is 49% of Australian households’ financial assets against 11% in New Zealand.
But it has not made households wealthier, relative to their incomes: net worth is nine to ten times income in both countries, and the median New Zealand adult ranks fourth in the world for wealth, only one place behind Australia.
Meanwhile, Australian household debt has climbed to 177% of income while New Zealand’s has been flat at about 125% for two decades.
The latest numbers show that Australian taxpayers spend almost as much on tax concessions for their superannuation contributions as they spend on the Age Pension itself. Once Australia’s superannuation tax concessions are counted, the true fiscal gap (cost to taxpayers) between the two retirement systems disappears and, over the long-term, is roughly half what the headline superannuation numbers suggest.
Poverty rates amongst the old in each country also don’t establish a ‘winner’. There are no official numbers in Australia but some reports suggest that it has about as many pensioners in poverty as here in New Zealand. So compulsion doesn’t seem to have fixed that either.
Nothing in the available data shows widespread under-saving in New Zealand so what, precisely, might a compulsory KiwiSaver’s objective be?.
However, New Zealand does need a research-led discussion about both public and private provision for retirement. We have never done that before.
My new report suggests that a compulsory KiwiSaver can wait until the data exist to justify it.
You can download the paper at https://www.pensionmatters.nz
How many times have you heard the A$4 trillion mantra? In fact, superannuation schemes in Australia now own about A$4.5 trillion, while our own KiwiSaver schemes have just NZ$138 billion. The comparison is apparently damning.
However, there is much more to the story if we want to understand what’s really happening under the hood.
Australia’s compulsory system has transformed how household wealth is packaged there: superannuation is 49% of Australian households’ financial assets against 11% in New Zealand.
But it has not made households wealthier, relative to their incomes: net worth is nine to ten times income in both countries, and the median New Zealand adult ranks fourth in the world for wealth, only one place behind Australia.
Meanwhile, Australian household debt has climbed to 177% of income while New Zealand’s has been flat at about 125% for two decades.
The latest numbers show that Australian taxpayers spend almost as much on tax concessions for their superannuation contributions as they spend on the Age Pension itself. Once Australia’s superannuation tax concessions are counted, the true fiscal gap (cost to taxpayers) between the two retirement systems disappears and, over the long-term, is roughly half what the headline superannuation numbers suggest.
Poverty rates amongst the old in each country also don’t establish a ‘winner’. There are no official numbers in Australia but some reports suggest that it has about as many pensioners in poverty as here in New Zealand. So compulsion doesn’t seem to have fixed that either.
Nothing in the available data shows widespread under-saving in New Zealand so what, precisely, might a compulsory KiwiSaver’s objective be?.
However, New Zealand does need a research-led discussion about both public and private provision for retirement. We have never done that before.
My new report suggests that a compulsory KiwiSaver can wait until the data exist to justify it.
You can download the paper at https://www.pensionmatters.nz
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