Bayly Andrew; Rurawhe AdrianNEW ZEALAND SUPERANNUATION AND RETIREMENT INCOME (FAIR RESIDENCY) AMENDMENT BILLSecond ReadingANDREW BAYLY (National—Port Waikato): I move That the New Zealand Superannuation and Retirement Income (Fair Residency) Amendment Bill be now read a second time.It is an absolute pleasure to be talking on this bill but before doing so I just want to acknowledge my colleague who was just sitting behind me the Hon Dr Nick Smith who is here on his penultimate day of being a member of this House for I think just over 30 years. So I just want to acknowledge him. It's great to be speaking on this bill. It is an important bill that was originally introduced by Mark Patterson who was a member of New Zealand First during the 52nd Parliament. As he lost his seat he asked me to take over this bill which I gladly agreed to do. I'm hopeful that both the Government and ACT are going to support this bill and I think the biggest issue in getting here tonight is how the Finance and Expenditure Committee has had to address one of the crucial deficiencies in the original bill that was put in: namely it didn't really deal adequately with the issue of the transitional arrangements in terms of if we are to move to a longer period of required service or living in New Zealand what would be those transitional arrangements? And I just want to particularly acknowledge the Hon Carmel Sepuloni first for allowing the officials to support and work with the committee and I think hopefully she will also be supporting this bill. Before we just look at the specific requirements in this bill I think it's worthwhile just looking at the international context for what's happening with superannuation around the world. The first thing I'd say: most countries are dealing and looking and reassessing their entitlement to superannuation given as populations are ageing demographic changes are occurring. Virtually all OECD countries are on a pathway to increase the age of entitlement—broadly most are aiming to increase it to age 66 or 67 years—and around half of the Governments have undertaken major pension reforms. Our closest neighbour just as an example has already increased the age of eligibility to 67 years and has a further plan to increase it to 70 years. If New Zealand keeps at the current rate of 65 years then the costs of New Zealand super will effectively double over the next 40 years to 2060 whereas in Australia with those changes they've made there will be quite a substantial reduction in the cost of super. So I think we've got to see this bill in the light of what's happening internationally which is basically countries re-evaluating and changing the age of entitlement to make it more stringent. Just in terms of New Zealand super the current value of New Zealand super is about $57 billion and under current projections it will be start to be drawn down in the years 2034-35. Even when it starts to get drawn down—and by that stage obviously hopefully the New Zealand Superannuation Fund's a much larger fund—it will only basically account for about 6 to maybe 10 percent of the annual pension cost. Everyone thinks New Zealand super is going to be the panacea and it's a very substantial amount of money and it's a good thing we have it but the reality is its contribution towards the annual payment that the Government will have to make is actually very modest—as I say in the order of 6 to 10 percent over time. So what that means right now: New Zealand super costs in 2018 were about $14 billion. It was about 17 percent of Crown expenses. So 17 percent of all the Government spending is going into New Zealand super and what we will see over time is a rapid escalation. And it's highly likely if you start doing financial projections for the Crown accounts that the costs of New Zealand super and health costs—health being the highest-value item at the moment; about $21 billion we spend on health—those two factors are likely to lead to a situation where they will probably account for about half of Government spending in the years to come unless there is reform of New Zealand super. And I think the issue is how do you realistically deal with those costs? And I'm not—and I don't want anyone to anticipate that I am—proposing that we deal with super in any way other than what this bill talks about what we're going to talk about tonight. I'm not suggesting that those costs mean that we have to take other decisions. This bill is an important element in basically trying to level off that escalation in price or cost that the Government's going to have to incur in years to come. I think the other issue that we need to take into account is that the ageing demographics of New Zealand are changing quite rapidly: 15 percent of New Zealanders are 65 or older at the present but that's forecast to grow to about 25 percent by 2050. So that demographic change is one of the issues why the costs are going up so significantly. Of course that's what Treasury are projecting in terms of the costs for and the financial implications for the Crown. Therefore there's a strong rationale why we need to be looking at changes to New Zealand super. The current arrangements are that you need to be a New Zealand citizen and you need to be aged 65 years or older and that you also need to have lived here for a minimum of 10 years five of which must be from the years that you turned 50. And so there's that double test—10 years but five over the years of 50. If you meet that threshold under a single entitlement currently it's worth about $403 a week or about $21000 per individual or if you're in a couple arrangement $672—on an annual basis about $35000. One of the most revealing issues about this is how generous New Zealand super is in terms of entitlement. We're one of the few countries in the world where you only need to have 10 years of entitlement. New Zealand and Australia are the two countries with the lowest entitlement. The average in the OECD is 26 years to be entitled to super. And I think this is one of the reasons why the previous Retirement Commissioner had a view that we should and she did recommend that we should be increasing the period of entitlement from 10 to 25 years—in this bill we only increase it to 20 years—but she also said that we should reduce the five-year test from age 50 onwards. So that was her recommendation and New Zealand National actually proposed that we reduce the value of this quite some time ago.So this bill effectively will affect fewer than 6000 people and what the bill proposes is that we raise the period of entitlement from 10 to 20 years. It excludes residents based in Realm countries namely Cook Islands Niue and Tokelau—so they are effectively covered by New Zealand arrangements which is only appropriate—and also anyone who qualifies under the veteran support arrangements. Also one of the changes we made in select committee was the removal of any increased requirement for refugees. The arrangement set out in the bill that's been reintroduced raises gradually over a 10-year period the entitlement. That means that for every two years that you are of age you have to do one year of additional service in New Zealand before you're entitled to superannuation. So what that means is if you're age 64 at 30 June 2021 you will still have to only meet the 10-year rule. If you're age 45 at 30 June 2021 you will have to do an additional 10 years to be entitled to this. I think one of the remaining issues is that we will need to look at when this comes into force and I think that's an open debate. The Minister and I have been talking about that. Whilst we agree with the 10-year phase-in period I think at the committee of the whole House stage we may look to make sure that the implementation date the start date for this bill is delayed so that those close to retirement have the ability to plan. But that's looking forward to that process in the committee of the whole House. Thank you very much.DEPUTY SPEAKER: The question is that the motion be agreed to.