In this Q&A Associate Professor Susan St John – co-director of the Retirement Policy Research Centre at the University of Auckland Business School – explains how we can protect our world-leading superannuation…
So, what do you propose?
In the current system – if you are over 65, still working and in the top tax bracket (income over $70,000) your super is taxed at 33%. So you get about 75% of the superannuation for a person in the lowest tax bracket – so there is some claw back for top earners already.
I think we have an amazing opportunity to restructure New Zealand Superannuation as a genuine basic income to allow us to retain all the world-leading features and also save some money.
I have proposed the basic income is called the New Zealand Superannuation Grant and set atthe current after-tax superannuation rate.
How would the New Zealand Superannuation Grant work?
It would work in much the same way as the current superannuation scheme. Everyone over the age of 65 would be entitled to receive this basic untaxed unconditional grant.
It would always be there regardless of other income and assets.
However if you claim the grant you would be placed on a separate tax scale for your other income.
What would this mean for people over 65 still in work?
So people over 65 who are still in highly paid work or have large amounts of other income would pay tax at a slightly higher rate if they claim the Superannuation Grant.
I propose using a superannuation tax scale of 17.5% on the first $15,000 earned – while income over $15,000 would be taxed at a rate of 39%.
Using these rates superannuitants would still benefit financially from drawing the superannuation grant until they earn more than $147,000.
People who earn over $147,000 are better off not to claim the superannuation grant and to pay tax at the regular rate.
And by doing this you calculate it would save a billion dollars annually?
Yes – and, the majority would notice no difference.
(ed:..what’s not to love about all that..?..eh..?..a billion bucks is a tidy amount..)