Super is a Ponzi scheme, ctd

A while back I linked to an article about social security acting and behaving as a giant Ponzi scheme. It was a US article but the same goes for our super scheme which is based on a Pay as you Go model. Farrar has picked up on David Chaston’s article on the same topic.

Basically, someone who finished high school with the School Certificate qualification in 1962 will be aged 65 in 2011, and eligible for NZ Super.

Statistics NZ has relevant data of earnings and taxes from 1962 and we can use that data to track the earnings in that working life – and from that data determine the taxes paid over that period.

Essentially, our statistically average person will have earned about NZ$1.4 million and paid about NZ$342,000 in tax, taking home a pay packet of a little over NZ$1 million over those 50 years.

Converting these raw earnings and taxes to 2011 dollars, they earned NZ$2.7 million, paid NZ$620,000 in taxes, and had take-home pay of a bit more than NZ$2 million.

However, for the next 20 years of retirement, they will claim in 2011 dollars NZ Super to the value of NZ$544,000 – or almost 88% of all the taxes they have ever paid.

If they live for 30 years in retirement, they will claim almost a third more than they paid in a lifetime of taxes. They ‘break-even’ after 22+ years.

Both David’s. Chaston and Farrar also miss the point that though the oldies have sucked up all the taxes they ever paid in super payments to themselves, they also used that taxation to pay for schools, road, hospitals, middle class welfare and a host of other unnecessary electoral bribes along the way. This means that their superannuation was never funded, never will be funded and relies on an ever increasing pool of workers being fed in at the bottom to prop up the takers at the top. This is classi Ponzi scheme characteristics that eventually collapses in on itself.

When we talk about welfare reform we really need to look at the single biggest group of beneficiaries, pensioners. They claim they have paid their taxes and now should live their remaining lives at the expense of the taxpayer when the reality is they had the best this country had to offer, paid bugger all for it, and are expecting the rest of us to pay for their ever increasing length of retirement.

The pity is that there are venal and corrupt politicians who periodically come along and promise the greedy old people even more “entitlements” in order to secure electoral sinecure.

 

 


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  • Nick

    While I don’t agree with everything on your website, Cameron, I’m right behind you on this.

    How many baby boomers have millions in assets (accumulated largely through indebting future generations with huge mortgages and student loans), yet still get a gold card and $14,000/year in pensions?

    It is by far the biggest rort of the public dollar. But a political death wish, and so goes unattended election after election, while it gets worse and worse.

  • neebone

    ‘…they had the best this coun­try had to offer, paid bug­ger all for it, and are expect­ing the rest of us to pay for their ever increas­ing length of retirement.’

    As a baby boomer I get a bit fed up with this notion. The generation that really scored was my parent’s generation while the baby boomer’s paid for it. I’ve never received welfare from the state, I object to being called greedy. The pension was created long before I was born, any attempt to change that along the way was greeted with outrage not so much from us who were paying for it but the Winston Peter’s crowd (the older generation). At the moment you are still eligible for the same pension just as I am. I’m 58 and you are somewhat younger, if I’m greedy, then so are you, what’s the difference?

  • Phronesis

    No need to cut super, just cut all healthcare spending on those over 65 and the problem will solve itself as nature intended….

    Seriously though, healthcare spending on this demographic is unsustainable and will cripple the economy before welfare payments do. The elephant in the room that no one is even admitting is there let alone willing to debate.

  • Matt

    The difference is that by the time Whale gets to retirement, the boomer generation will again have pulled the ladder up from under them. It’s all too clear what’s going to happen. The boomers will all draw pensions at 65, live on at the expense of the taxpayer for many, many years, often drawing salaries for several years too, and bankrupting the next generation through the massive taxation that will be needed to support the top-up to their income. We’ll reach breaking point some time in the next 10 or 20 years, and the age’ll be lifted quickly and sharply, and future generations will lose ALL of the benefits of universal superannuation in a short, nasty corrective blip.

    All the younger generation wants is a review, and for the older (and wealthier, and healthier) generation to make some sacrifices, so that we can ALL have super from now and for many years into the future. We’ll make the same sacrifices when the time comes too, but right now, it’s their turn. It’s not fair to turn your children into tax-slaves to chase some unrealistic and uneconomic dream that is a waking nightmare for the rest of us.

    We wouldn’t need asset sales or a CGT if we dealt with super properly and fairly. And all fairly means is not paying a pension to someone who doesn’t need it.

  • John Q Public

    “As a baby boomer I get a bit fed up with this notion. The gen­er­a­tion that really scored was my parent’s gen­er­a­tion while the baby boomer’s paid for it”

    You don’t explain how your parents, who fought WWII and then did the hard nation building afterwards while you drank your free school milk and ran gleefully around your affordable quarter acre section, benefited more than you will, Mr Boomer?

  • neebone

    Don’t have any argument with that Matt, I’m just sick of being called greedy when I’ve never been asked about any of this. Savage introduced the pension, Muldoon made it universal and not subject to means testing when he bribed my parents’ generation and subsequent government’s have used it for football. It’s the system as it was handed to me. I have no intention of retiring until I drop on the job (the young think that’s greedy too) and expect to be able to support myself in my old age. Like it or not I will still get the pension, there is no way to avoid it without dropping dead as the ‘final solution’ (Phronesis’ point). Nobody has ever asked me if I thought it was a good idea, so how does that make me greedy?

  • neebone

    Don’t have any argument with that Matt, I’m just sick of being called greedy when I’ve never been asked about any of this. Savage introduced the pension, Muldoon made it universal and not subject to means testing when he bribed my parents’ generation and subsequent government’s have used it for football. It’s the system as it was handed to me. I have no intention of retiring until I drop on the job (many think that’s greedy too) and expect to be able to support myself in my old age. Like it or not I will still get the pension, there is no way to avoid it without dropping dead as the ‘final solution’ (Phronesis’ point). Nobody has ever asked me if I thought it was a good idea, so how does that make me greedy?

  • neebone

    Don’t have any argument with that Matt but the options aren’t great. Live and be greedy or die (Phronesis’ point). As long as I choose to live I am subject to laws that were voted in by my parents’ generation with no way to change that. I am not greedy.

  • thor42

    I agree with WO. Super’s a Ponzi scheme, just as the rest of the welfare system is.
    F**k. You would think that this country would f**king-well realise by now that super is unsustainable in its present form.
    SURELY it is common sense that the eligibility age be gradually raised. IT’S NOT AS IF GETTING OLD IS AN “UNEXPECTED EVENT”, IS IT? Everyone knows damned well that old age is coming (bar you getting the “big C” or whatever), so you should be f**king-well PLANNING for it. IS THAT TOO MUCH TO ASK?
    FUCK. IF I CAN PAY OFF A MORTGAGE AS A SINGLE GUY, AND STILL PUT ASIDE ENOUGH TO HAVE A USEFUL NEST-EGG ALREADY (AT AGE 49), FUCKING ANYONE IN THE COUNTRY SHOULD BE ABLE TO DO IT.

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