Growing Old Gratefully

The Super Generation



Written by Rebecca Glover

There’s never been a better time to be old in New Zealand. Baby boomers, the generation born after WWII, are enjoying longer and better twilight years than ever before. And they are enjoying those years thanks to better health, better living conditions and greater wealth than their predecessors.

Courtesy of government-provided, universally available superannuation, today’s elderly have a basic income enabling them to live in relative comfort, particularly if they have extra savings of their own. Many moaning millenials and their parents feel aggrieved at the sight of their elders conspicuously spending their taxpayerprovided income, forgetting that in due course it will be their turn – and for much longer than current superannuitants. Those in their 30s and 40s can expect to live well into their 90s, while a child born in New Zealand today could, according to some estimates, live to be 100 or even 150. That’s a long time on super.

It was not always thus.

In these flush times we take for granted the many and various government-provided payments New Zealand makes available to its citizens. But in the era before the younger generation were taxed to provide for their elders they would instead have had to provide that support themselves. Around the time New Zealand became the first country in the world to grant women the right to vote, children were expected to look after their aged relatives, and for those without family support the picture was grim indeed.

In the Britain that many of our early settlers had escaped, the dreaded workhouse with its spartan conditions was the final repository for the destitute.

The vision of the Liberal government of the 1890s, in the words of one of its members, William Pember Reeves, was “the hope of preventing and shutting out some of the worst social evils and miseries which afflict great nations”. In a new nation without the old world strictures of class and wealth the government saw the opportunity to create a fairer, more equitable society than the rest of the world – and the world looked on in awe at our social experiment.

On the heels of pioneering labour reforms and female suffrage already enacted by the Liberals, a bill to establish a pension for the aged was introduced on September 21, 1898. It was debated continuously in committee for 90 hours, with more than 1400 speeches delivered. Prime Minister Richard Seddon slumbered through some of the proeedings under a possum-skin rug, his head resting on a crimson cushion.

In a world first, the Old Age Pension Act became law on November 1, 1898, preceding a similar Act in the UK by 10 years.

Intended for the ‘deserving poor’, the amount on offer was minimal and means tested. Applicants had to have lived in New Zealand for the previous 25 years, but Chinese were specifically excluded. Proof was required that the applicant was aged at least 65, which disadvantaged the many Maori whose births had not been registered – not that many Maori made it to 65. Average life expectancy for Maori as late as 1911 was only 35 for men and 30 for women, while a decade before that Pakeha men could expect to live to 58 and women 60. However Pakeha did not live to collect the pension in any numbers until the 1930s.

It was a far cry from the relatively generous universal super we now enjoy, but it was at least a novel recognition of the state’s responsibility for elderly citizens who were not able to provide for themselves. The increased spending power of recipients also contributed to the economy in general.

Further pensions followed, for widows in 1911, for the blind in 1924, and a small family allowance was introduced in 1926, all means tested.

As the economy shrank during the Depression of the 1930s, so did pensions. It wasn’t until the election of M J Savage’s Labour government in 1935 that the state assumed responsibility for ensuring at least a minimum standard of living for every New Zealand family. The raft of legislation that Savage announced to the 1938 Labour Party conference promising state care “from the cradle to the grave” was rapturously received by a population ravaged by the hardships and uncertainties of the recent past.

The 1938 Social Security Act restored and increased the level of pensions and lowered the age for the means-tested pension to 60, as well as introducing a universal (not means-tested) superannuation from age 65. The universal pension catered to a strong demand for universal payments, while the lowered age for the means-tested pension provided for the likes of manual workers who were worn out and still poor at the age of 60. A social security tax was imposed to pay for these and other payments.

Subsequent administrations continued and expanded the system, including the removal of previous racial restrictions and requirements for moral rectitude on the part of beneficiaries.

In the 1950s the International Labour Organisation labelled New Zealand a model welfare state.

To alleviate the increasing cost of pension payments on government, Labour’s 1974 Superannuation Act introduced a scheme whereby employers, employees and the state contributed to an interest-bearing retirement fund, aimed at ultimately doing away with the need for social security age and superannuation benefits. However, political factionalism came into play when Robert Muldoon’s National government quickly repealed the legislation and introduced its own version, a flat-rate pension without the need for contributions, giving 80% of the average wage to married people aged over 60. This extravagant scheme was subjected to a surcharge by finance minister Roger Douglas in the incoming Labour government of 1984 and continued by the subsequent National administration.

‘The super’ has continued to be a bone of contention ever since. At around $300 a week it hardly allows superannuitants to live the high life, yet its total cost to the nation continues to grow. Spending on New Zealand superannuation grew from five billion dollars in 2000 to over $11b last year, accounting for half the welfare budget. Younger taxpayers fear that the money will be gone by the time they get to enjoy the benefits of the gold card, and they will have to wait another couple of years for it by 2040, when the age of eligibility will be 67.

Meanwhile superannuitants are healthier than ever before – with less drain on the health system – and continuing to work and pay taxes. Almost a quarter of the population over 65 are in work and contributing to the economy.

But if youngsters are grizzling about their grandparents, the burgeoning retirement village industry certainly isn’t. Maybe a KiwiSaver account heavy with shares in Somerset, Bupa or Ryman is the way to go!