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Saving a Super Scheme

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  • Thu 8 Mar ’12, 12:30pm – 2:00pm


Spectrum Theatre, Cnr Jonston St & Customhouse Quay, Wellington


All Ages

Ticket Information:

  • Free Admission

Saving a Super Scheme: the economics of PAYGO and SAYGO retirement schemes in New Zealand.

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Speaker: Dr Andrew Coleman, Senior Fellow at Motu Economic and Public Policy Research

Discussant: Dr Malcolm Menzies, Reasearch Manager at the Commission for Financial Literacy and Retirement Income

Nearly fifty years ago, Peter Diamond showed that prefunded (save-as-you-go) retirement scheme require much smaller contributions for any level of retirement incomes than pay-as-you-go retirement schemes if the return to capital investments is larger than the growth rate of the economy. Since then, a voluminous international literature has examined the comparative merits of the types of schemes. In general, this literature has shown that there would be significant efficiency gains from making a full or partial conversion to SAYGO funded retirement scheme, but that there are difficult transition issues. This talk examines the economics of PAYGO and SAYGO funded saving schemes in New Zealand. It argues that it is likely that the annual tax contributions needed to support the current New Zealand Superannuation scheme could be halved if the scheme were fully converted to a SAYGO scheme, and that feasible transition paths to a partially funded SAYGO scheme exist. Converting New Zealand’s retirement scheme to a SAYGO funding basis is therefore a possible solution to the issues associated with population ageing. A comparison with Australia, where people are reaping the rewards of making the transition to a mixed SAYGO-and PAYGO pension scheme, is offered.

Andrew began at Motu in February 2008, coming from a position as Senior Adviser at the Reserve Bank. He has a PhD in Economics from Princeton University. He earlier worked as an Assistant Professor of Economics at the University of Michigan, where he taught economic development and international finance. He has also worked at The New Zealand Treasury and the United Building Society. In 2004, he took a 6-month sabbatical at Motu.

Andrew’s research interests lie in macroeconomics, particularly in the area of savings and wealth. His recent work at Motu also includes research programmes on emissions trading and climate change, and transport and housing. Andrew also teaches part time for the University of Otago.

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