Thursday, August 14, 2008

Why phase out national superannuation?

Read this Op-Ed from the Ayn Rand Institute published on SOLO - replace Social Security in the US context with National Superannuation in the New Zealand context.

Add in the fact that those who die before they reach retirement age get nothing, nor do their spouses or children or anyone else in their will, from the years of compulsory contribution by taxes. The state has thieved those taxes to pay for someone else or something else. This particularly affects Maori, who have lower life expectancy.

National superannuation is an enormous fraud, and it is about time that it was slowly phased out to let people choose how to save for their retirement. The most painless way would be to cease increasing national superannuation in nominal terms, and recycle the savings through tax cuts.

However I advocate a far more aggressive approach. One option is that people of certain ages are told they will receive a range from 90-10% of current national superannuation on retirement, nominally. In return, all people of those ages get a tax cut to allow them to save, invest or whatever. On retirement the state pays out the proportion that was promised and no more. A simpler approach would be to grant people a lump sum to buy a contributory pension or any investment, with provision for those too close to retirement to invest (given they spent most of their lives paying tax for others to have national superannuation).

Is it not telling that the fraud of national superannuation isn't even on the agenda in New Zealand? What other retirement fund could get away with the shockingly poor returns of national superannuation?

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