Could a flexible superannuation cost taxpayers less?

The head of chartered accountants' organisation New Zealand says letting people choose to defer receiving superannuation could lead to savings of nearly $100 billion over 20 years.Chartered Accountants Australia and New Zealand modelled letting people choose to take super between ages 66 and 70.Chartered Accountants New Zealand head Peter Vial told Nine to Noon in their preferred scenario 40 percent of eligible retirees would defer receiving super until age 70, in order to get a higher payment.That would lead to savings of $98 billion over 20 years, and in 2048 it would be saving $7.8 billion a year.The current cost of superannuation to the government was $26 billion a year which was 5 percent of gross domestic product (GDP) and about 19 percent of all New Zealand tax collected was spent on superannuation, he said.There would be a three-fold increase in the cost of super by 2048 to $73b a year and it would then be up to 8 percent of GDP and it would equate to 30 percent of all tax collected, he said."So the problem is stark and the numbers are scary."In the 1960s New Zealand had seven working age people to every one pensioner, currently there are four and by 2065 there would only be two working aged people to every national superannuitant, he said."So we've got over 900,000 on super now and in 10 years time I think we'll have over 1.3 million."Vial said although the superannuation fund would be helpful it would not go anywhere near solving the problem.Raising the age at which people could receive superannuation would help but it would "only push the problem out", he said."What we're suggesting is that people have an option of taking super either at 65 or at ages right through from 66 to 70, so some people will defer and that reduces the cost."One of the scenarios modelled was for people to still get superannuation at 65 but that meant they would only receive 95 percent of the current rate, he said."Or push it through out to 70 and each year they'd get 107.5 percent of the current rate - that would save $98 billion over 20 years."He did say it was a harsher model for those who had no choice but to retire at 65, because they would receive 95 percent of the current entitlement.The alternative was that the age you could receive superannuation would go up for everyone, he said."And it may go up to 67 as some of the parties are currently suggesting but the numbers are looking so serious and so scary that the numbers could go up to 68, 69 or 70."So in our view this is a much fairer approach, it gives people choice."Ideally 40 percent of people would defer receiving superannuation but even if only 20 percent deferred it would still result in saving $64b over 20 years, he said.Other models made smaller changes but would raise less for the government overall.One was a scenario where people could get 100 percent of super aged 65, he said.If you deferred taking super under that model you would get an increased amount depending on how long you deferred it, he said."So if you deferred to 67 you would get you'd get 105 percent, the curb is not so steep so the saving is less. The saving over the 20 years would only be $72 billion as opposed to $100 billion [in the first scenario]."He said despite the lesser savings it was a fairer model where no one would be worse off."There is a third model which has a much steeper curve, so people take 90 percent at 60 and if they defer to 70 they get 130 percent which is a very big sum and that doesn't save quite as much as the first model."It still provided a decent saving but it was much less fair, he said.Vial said in doing the modelling they aimed to spark political debate on the issue."We want the next government, whatever it looks like, to have some cross party discussions and deep analysis here. Treasury and IRD [Inland Revenue] have done a lot of work here and politicians seem to be kicking the can down the road."Vial warned that if nothing was done to the current superannuation rates it would cause a crisis in 10 to 15 years and the eligibility age would need to go up quickly.