Thousands of over-65s earn more than $200,000 - should they get NZ Super?

Scoop

7 days ago

More than 9000 people aged over 65 earn more than $200,000 a year, and another 33,000 earn between $100,000 and $200,000 - and the Retirement Commissioner says it's fair to question whether they should be able to claim NZ Super as well.
The data comes from the 2023 Census. The number earning between $150,000 and $200,000 has decreased from 2018 but the number earning between $100,000 and $150,000 has lifted by 10,000.
The Census also showed that the number of people over 65 still in the workforce had increased.
Just over 24 percent of people aged over 65 were in work, up from 22.1 percent in 2013. The biggest increase was among people aged 70 to 74.
Retirement Commissioner Jane Wrightson is opposed to putting up the age of eligibility for NZ Super.
She said if there were questions about the cost or fairness of the scheme, they needed to be addressed with a package of measures.
"Then you absolutely have to look at means-testing again. It's really unpopular but it would be improper if we didn't look at all the sensible options if the goal is to reduce the cost to the state."
She said the problem to be solved needed to be defined and then the possible solutions assessed.
"Means testing is absolutely one of those options but politicians run away from it because it's got a pretty ugly history and it does make it a more complex system. There's no doubt about it, people will start arranging their affairs and start avoiding tax and all that kind of stuff.
"But if you boil it down to a very simple thing - is it right that someone earning over $180,000 or $200,000 - I think $180,000 is probably about the mark because that's when the tax rates go up - is it right that people out there earning over $180,000 can also acquire Super, it's an extremely good question."
She said it would be easy to capture the earnings of people being paid a salary while receiving NZ Super but much harder to assess other income.
"It's both complicated and it's easy. The easiest thing is to leave well alone. The next easiest thing is to just put the age up but that is too easy because there is harm attached to that…. So that's what I'm talking about when I say please could we have a package if we do any system change at all and can we please stop talking about this as single issue?"
She said there should be a cross-party political conversation to determine a path forward.
University of Auckland associate professor Susan St John earlier outlined a plan to treat NZ Super as a tax-free basic income grant and put recipients on a higher tax rate.
She said it would be a better option than the age of eligibility or the amount paid.
It would create a situation where there was a break-even point beyond which people would be better off, on a net basis, not claiming NZ Super and instead being taxed at standard rates.
She said the tax scales she had modelled were less harsh than the abatement that applied to people receiving a benefit.
The government has introduced parental income tests for young people receiving the JobSeeker benefit and will restrict access to the member tax credit in KiwiSaver to those who earn more than $180,000.
St John said the reason that similar moves weren't made on NZ Super might reflect historical attitudes towards the "deserving and undeserving".
She said NZ Super was effectively income-tested through the tax system because people who were earning other income would pay higher rates of tax.
"Just far less draconian than the clawbacks for children with Working for Families and adults in the benefit system."
Simplicity chief economist Shamubeel Eaqub said means and income testing in Australia meant that only about 60 percent of the population would qualify for the pension. If that were true in New Zealand, it could save about $9b a year.
There are 74,850 people aged 30 to 64 earning more than $200,000.
The median income for people aged over 65 is $26,600.