“I’m more concerned about the notion that we need compulsory savings to boost the local capital markets”

That aspect irritates me no end – along with the whole “we need to invest in Kiwi businesses, not overseas, because …”.

And this people that act like its an “obvious fact” even though they CAN’T PUT TOGETHER A COHERENT ARGUMENT. Lets just say this issue is the big one for me at the moment – and it makes me very angry.

@Gregor W

“The compulsive element does not need to be strengthened for Super. Am I correct in thinking that you already have to ‘opt out’ of Kiwisaver?”

Indeedy! I don’t mind an opt out scheme – I do find the idea of being forced to save a bit of a pain. Especially when it is in the type of situation that Miguel mentions, when we just have a bunch of fund managers that want cheap funds 🙁

“Errrm….ever heard of Her Majesty’s Pleasure? ”

Hahaha, indeed. Thanks goodness we have the state to protect us from ourselves 😛

The compulsive element does not need to be strengthened for Super. Am I correct in thinking that you already have to ‘opt out’ of Kiwisaver?

“If the state thinks you are incompetent, they will make you do what they think is right – seriously, CAN HE HEAR WHAT HE IS SAYING.”

Errrm….ever heard of Her Majesty’s Pleasure? 😉

“NZ got into compulsory savings in a big way in 1986.”

Agreed but …

I see the justification for national super as providing a welfare payment to people over a certain age – effectively once you reach a certain age you are entitled to a minimum income according to government. This is funded through current taxation.

I don’t see this as equivalent to a compulsory super scheme that makes you save some of your income for the future. Although both are forced schemes, which I am not particularly a fan of, at least the first one can be seen as some twisted version of a “minimum income” progressive policy, while the second one is simply creating direct credit constraints for people.

“This is the trouble with a system where prices are “midly distorted”. We see the same thing with alcohol and tobbaco policy. It enables interventions to be couched in the language of externalities when, in reality, it is naked paternalism that is motivating the intervention.”

I don’t disagree – which is really why we need better policy analysis in the first place. If governments were only allowed to justify externality taxes on the grounds of “measured externalities” – and if these were measured justifiably – any additional policy would have to be couched in the language of paternalism.

However, I don’t see moving to a strictly compulsory scheme as superior – as it is simply moving to the very extreme of possible outcomes immediately.

“However, I would still prefer a system where the price signals are mildly distorted but there is choice, to a system where choice is completely ripped out – which is what compulsory super does.”

The train has already left the station on this one. Take the current national super and calculate the present value (based on the risk-free return on NZ govt securities) of each individual’s expected lifetime entitlement from the age of 65 on. Create a book-entry “fund” of treasury bills equal to the size of the sum over all individuals of these present values and then create an offsetting book entry of government debt. This exercise is nothing other than a relabelling government assets, but it is easily interpreted as a history of compulsory savings funded from tax dollars invested in a mutual fund of govt securities from which one can draw an annuity at age 65 conditional on remaining in NZ. In other words, NZ got into compulsory savings in a big way in 1986.

“However, I would still prefer a system where the price signals are mildly distorted but there is choice, to a system where choice is completely ripped out – which is what compulsory super does.

And I wish the government and advocates were being honest that the reason they want to do this is because they think people are stupid – if they heard themselves actually say that, out loud, they might change their mind …”

This is the trouble with a system where prices are “midly distorted”. We see the same thing with alcohol and tobbaco policy. It enables interventions to be couched in the language of externalities when, in reality, it is naked paternalism that is motivating the intervention.

Interesting stuff. I can see where you are coming from – the justification for this policy is largely paternalistic.

However, I would still prefer a system where the price signals are mildly distorted but there is choice, to a system where choice is completely ripped out – which is what compulsory super does.

And I wish the government and advocates were being honest that the reason they want to do this is because they think people are stupid – if they heard themselves actually say that, out loud, they might change their mind …

I’m with you if the choice is between do nothing–the optimal solution to a non-problem– and adding an additional compulsory savings scheme.

But I fear that the question is going to be about compulsory savings versus incentives to save. If someone could identify a clear (non-pecuniary) externality from savings, I might buy into the idea of savings incentives as a kind of Pigouvian tax. But if the motivation is paternalistic, I would much rather see the honesty of compulsory savings (“you are stupid, so we are going to force you to act in your own interest”), than incentives which essentially tax the people who, according to the paternalistic judgement, are very stupid in order to nudge the behaviour of those who are only slightly stupid. That is, it takes from those who, despite the nudge, still won’t save more, to give to those whose stupidity is only slight making them susceptible to nudges. Paternalism, if we are to have it at all, should be made of sterner stuff than that.

I think it is just easier for them to frame this policy as them magically saving the economy – especially when they have fund managers in nice suits supporting it.

Seriously, this is a policy “solution” without a clear “problem” – people just keep making up little problems to support the solution they already want – which is more $$$ for fund managers.

Bleh.

If the ageing population is a problem, at the very least change the retirement age. Hell, go further and mess about with government super. Means test it, whatever.

Or would that be too much like hard work?