Next Wellington Seminar
Next Wellington Seminar
Topic: Retirement income policies in New Zealand - what really matters
Speaker: Michael Littlewood & Andrew Coleman
Date: Tuesday 21 April 2015
Venue: Simpson Grierson, Level 24, HSBC Tower, 195 Lambton Quay
Time: 5.30pm for refreshments, 6pm seminar start
About the seminar:
Two experts, Michael Littlewood from the University of Auckland and Andrew Coleman from the New Zealand Treasury and the University of Otago, will each speak about their vision for New Zealand’s retirement income policies.
Michael Littlewood will speak about how New Zealand faces an ageing population but has one of the most sustainable and effective sets of retirement income policies in the developed world. That does not mean those policies are ‘right’. We need to discuss all aspects of the public policy environment from first principles to test their suitability for the 21st century. The government should focus its public policy attention on the things that only governments can do. That does not include building up a pool of investments or forcing people to save or offering incentives to save for retirement. So, what can (should) governments do? How do we get a discussion going on the things that actually matter?
Andrew Coleman will outline the framework developed fifty years ago by several Nobel prize winning economists that focussed on the intergenerational consequences of government expenditure programmes. This framework has been central to the analysis of government retirement income programmes as it established two principles:
(i) The government has a comparative advantage over the private sector in managing the risks associated with retirement income: as it is indefinitely lived, it can use its balance sheet to absorb asset market fluctuations, and as it has the power of taxation it can transfer risk within generations and between generations in a manner that is not otherwise possible.
(ii) Retirement incomes can be funded on a pay-as-you-go or a save-as-you-go basis. If the economy is dynamically efficient (ie if the return to capital exceeds the growth rate of the economy), government programmes funded on a pay-as-you-go basis result in large transfers between generations as they impose large opportunity costs on young and future generations.
In this talk, Andrew will go on to discuss how these two principles should shape the structure of retirement income policies in New Zealand. He argues that while the benefits structure of New Zealand Superannuation has many desirable features, when it is largely funded on a pay-as-you-go basis it imposes costs on future generations that seem unduly onerous, and which may not reflect the desires of a majority of New Zealanders. Different means to reduce the extent of pay-as-you-go funding (and increase save-as-you go funding) are examined. He will also consider the potential advantages of the government assisting individuals to better manage the risks they face by providing them with the option to purchase annuities from the government at actuarially fair rates.