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Tuesday, 9 March 2010

Superannuation & Health

Without wanting this to be a plug for the ACT Party, I couldn't help agreeing with the comments Sir Roger Douglas has made here about superannuation and health. Something needs to be done to change the system which obviously isn't working.


Superannuation today locks you into poverty in your retirement. And the low levels of superannuation occur despite the high cost to taxpayers.

Superannuation costs you one third of your personal tax. If you earn the average wage, that’s $4000 a year. Superannuation is not free. It costs you. Our super scheme is designed so that people pay today for the retirement of their parents. If we simply adjusted the system so that money went to pay for your own retirement, most would have a cushy retirement.

If that money was put in the bank, earning seven percent nominal interest (five percent real), then the average worker would retire with over $1,000,000. It would be like you’d just won lotto and then retired. And let’s say you put that money in the bank at one percent interest – a pathetic one percent. The interest on that money would return more to you than current superannuation does.

A single pensioner currently gets $311 a week, while a married pensioner gets $239. With just two percent interest on the capital, they’d earn in excess of $347. If we used the more realistic five percent figure, then the average income of a pensioner would be over $1000 a week. So the cost of Government superannuation, in old age, is a capital sum in excess of a million dollars, from which interest in excess of $1000 a week could be earned. It’s costing you.

Some go through their lives, scraping by, paying tax, but not having enough left to save. When they retire, they’ll get whatever the politicians of the day decide they deserve. But the wealthy, well, they will have saved for their retirement. They’ll be able to live in comfort, doing the things that most want to use their retirement for.

The raw deal most get from Superannuation is only going to get worse. The flight of New Zealand’s most skilled, combined with the baby boom, will see increasing burdens shifted to the working poor. They will pay high taxes and receive a stingy pension. But while changing the system would help us all, it would harm some politicians in Labour and National who rely on promises they cannot deliver to win votes. By making people self-reliant, they would have to change strategy from making increasing numbers of people recipients of welfare. The power that gives them is something they will be unwilling to give up, unless we force their hand.


54 percent of your and every one else’s personal tax goes towards healthcare. The growth is scary, when just two years ago the figure was 41 percent of your personal tax.

Saying 54 percent can hide what this means. If you earn minimum wage, you will pay about $2500 every year for healthcare. If you earn the average wage, you will pay over $6000 for healthcare.

People say that we have a free healthcare system. To me, it seems that free healthcare has never been so expensive! Healthcare is not free. It costs you. And when healthcare costs the average person $6,000 every year, you’d hope that it really delivered.

And yet it doesn’t. Despite the enormous cost, we ration healthcare. People who are sick get placed on a waiting list. On that waiting list people get worse, not better. Some die. And the suffering that takes place on health waiting lists is rationalised away, as if the goal of equality justifies denying healthcare to people who desperately need it.

If the health system treated every one like this, then at least it would treat us all equally. But the most pernicious effect of socialised medicine is how it creates second class citizens. The first way it does this is through a bizarre mixture of subsidies. Some medicines are fully subsidised, some are partially subsidised, and
others are not subsidised at all. Decisions over what medicines you can take are actually determined not by the patient, not by the doctor, but by a bureaucrat in Wellington.

The second way it creates second class citizens is through the way pressure can be
applied to get treatments performed. Doctors, patients, politicians, can all pressure the system to get certain operations performed at the expense of others. If you can get your story on Campbell Live you can be sure you’ll get your treatment. If you can form a pressure group to get Herceptin subsidised, you’ll get your treatment. But in socialised health, your treatment comes at the expense of someone
else’s. And because the affluent tend to be the more politically connected, the
more influential, the more organised, treatments for the rich come at the expense of the poor.

The third way it creates second class citizens is the fact that affluent people can afford to pay twice. They can afford to pay tax for healthcare, and then buy health insurance on top. The very people who are denied this opportunity are the people that universal healthcare was meant to help. While the poor remain ill or die on waiting lists, the affluent may visit a private hospital. No one would seriously contend that the system treats people equally.

But the solutions we hear to this problem are the same kind of pathetic snake oil we hear from all the other parties in Parliament. All the problems could be solved if only there was more money. When will we wake up to the lie? Under Labour, health spending increased in real terms by 50 percent. We still have waiting lists. We still have a system that creates second class citizens. Despite the huge increases of resources at their disposal, the productivity of doctors actually reduced by 15 percent. Nurse productivity dropped 11 percent. Overall, the drop was only eight percent. Why eight percent? Because the productivity of cleaning and orderly staff surged. And those services were outsourced to the private market. This just gives a hint of the kind of benefits that could be achieved if we dropped the pretence and lived up to the reality: socialised healthcare has failed.

If we simply gave the person on the average wage the $6,000 back they currently pay, this would enable them to buy catastrophic insurance, put money aside for their healthcare in retirement, and pay for their day to day healthcare needs such as doctor visits.



Alan said...

I agree with both here. The Superannuation bit would be solved by resurrecting the State NZ Superannuation Scheme of the mid 70s, contributed to compulsorily by all, its premature canning being the single most disastrous thing the Muldoon government did when it took office, and arguably one of the most disastrous decisions of the 20th Century for NZ...

The second of course ignores completely the mad bureaucratic health board model foisted on NZ, which, from its inception, swallowed huge dollops of cash for much less health care return, and cynics like myself would say it was designed to create a gap in delivery that would steadily be taken up by private health, which is what has, and is, happening.Privatisation of health by stealth.

Kevthefarmer said...

No, I have to disagree with almost everything you say here.
Historically, that is to say throughout human existence, except for the last, say, sixty years, the welfare of the older generation has fallen upon the younger generation. In it's simplest form this was all well and good. I well remember my Great Grandfather living with my Mothers Aunt and Uncle in the final years of his life and doing what he could as far as gardening and so-forth until his death well into his nineties. Of course the whole system relied on a high degree of social cohesion, although there were many instances of unrelated "friends of the family" being taken in by unrelated families in order to live out their final few years in a modest but civilised environment.
In these days when people have fewer children, and with regard to the lottery that occurs when a person/couple are unblessed by the advent of children, or their sexual orientation precludes the production of offspring and where the general disintegration of the social fabric enables the younger generation to deny responsibility for the wellbeing of their elders, then society has deemed fit for the state to assume that responsibility.

The figures put forward by Douglas in this article are no doubt accurate from an accountants point of view, but to extrapolate the notion of seven percent return on investment over the next several decades is a dangerous nonsense. Forty years ago, with hindsight, any sum invested would yield a huge return, but in that time, the opportunity for limitless growth seemed like a "natural law". In 1972, the Club of Rome commissioned the report "Limits to Growth" that attempted to model the interaction of the concept of limitless growth with the realisation that the planet earth does not provide a limitless resource base. So far, 37 years on, the pattern of the global economy has been consistent with their findings.

The consequences are dire for the uninformed investor, but the banking sector has much invested in the concept of "Businesss As Usual Until The End Of The World As We Know It". Any other notion for them is unthinkable.

For us, we have the freedom to visualise a world where Natural Law takes precedence over the artifice of accountancy. We can look forward to a time where our Sovereign Government resumes sole authority to issue money on our behalf and to see an end to the centuries old "crime of usury" perpetrated by the banks that the likes of Douglas, Brash, Key depend upon for their very existence.

Shane Pleasance said...

My retirement and my health are my business, not the governments. Just leave me alone.