Fair to the taxpayer? MPs dodged cuts to their lavish super scheme

The generosity of the superannuation scheme enjoyed by New Zealand MPs was questioned by authorities in 2020 – then Covid hit and nothing was done.

When MP remuneration and perks come under scrutiny, MPs have been fond of saying “the rules are set by the Remuneration Authority”.

That authority reviewed MPs’ salaries and benefits in 2020, finding the super scheme may not comply with the Remuneration Authority Act because it is too lavish.

According to its Review of Remuneration for Parliamentarians 2020, the scheme didn’t “achieve and maintain fair relativity with the levels of remuneration received elsewhere” and was not “fair to the taxpayer”.

The authority suggested a plan for MPs to address this but the review and plan were shelved during Covid. If they hadn’t been, the Remuneration Authority would have been responsible for driving any change.

Subsequent reviews have considered MPs’ superannuation out of scope - and the generous system has continued.

If the authority’s suggestion had been implemented after the 2020 election, taxpayers would have saved nearly $8 million by now.

What do MPs get under the scheme?

Salaries and benefits for New Zealand’s members of Parliament are set by the Remuneration Authority.

The current superannuation scheme for MPs dates back to 2003, three years before KiwiSaver was introduced.

Under KiwiSaver, most New Zealanders get a dollar from their employers for every dollar they contribute to their own KiwiSavers, up to 3.5% of their salaries.

By comparison, MPs get $2.50 for every dollar they put in to their superannuation scheme, up to a maximum of 20% of an ordinary MP’s base salary.

That means that an MP only needs to contribute $14,496 of their own money annually to the super scheme to pocket the maximum – an additional $36,240 courtesy of the taxpayer.

An MP who entered Parliament in 2005 and left after this year’s election could have put just shy of $1 million into their superannuation scheme. At an annual return of 5% over the twenty-one years this would have grown to $1.66m.

If every MP made the maximum contribution, the total annual cost of their super schemes would be $4.4 million each year.

The consultation document for the 2020 review noted that with the advent of KiwiSaver it could be argued there was no longer a need for MPs to have their own special scheme.

It also pointed out the Remuneration Authority Act prevents the reduction of existing MPs’ remuneration including superannuation.

To address that, the review suggested that from the 2020 election newly elected MPs could receive KiwiSaver, while MPs elected before the 2020 election should continue in the current scheme until they left Parliament.

The chairwoman of the Remuneration Authority, Dallas Welch, told the Herald that the authority could make this change, but it would need to consider the fairness of having MPs in two different superannuation schemes.

In 2023, the authority carried out a review of MPs’ salaries, but their superannuation was excluded from that review.

Welch, who joined the authority in 2021, said it wasn’t clear why superannuation wasn’t part of that 2023 review.

“I’m sorry I cannot tell you that and I’ve done a good hunt through our files to see what we might have on record.

“I’m not able to give you a good straightforward answer to that why.”

Welch added that in 2023, “We did take a very brief look at it and decided at that time not to make any changes.

“A deep dive into superannuation is certainly something that needs to be done.”

Welch also said the authority “certainly would be consulting” on MPs’ superannuation and members of the public should feel free to contact them with their views.

A constitutional law expert, Graeme Edgeler, likes the current MP super scheme and believes it is good for democracy. He told the Herald, “One of the reasons we pay MPs well is that we want to ensure that there are no reasons for them to be corrupt in any way.

“Having a superannuation package as part of an overall salary is just an extra thing on top of that.

“You will have enough money in to retirement so that you will be fine. You do not have to do things to earn money – extralegally – while you are in Parliament."

Edgeler believes we should go further than current legislation allows, and tie the superannuation benefit to MPs’ good behaviour.

He told the Herald that after former MP Taito Field was convicted, the rules were changed so that MPs would lose some of their post-retirement benefits if convicted of certain crimes.

He believes the super scheme in its current form has anti-corruption benefits but these could be strengthened.

“Having that sort of extra little incentive, do not misuse your position because, if you’ve been an MP for a long time, you could be losing quite a lot of money.”

The Taxpayers Union recently launched a petition calling for the end of MPs’ “gold-plated” super scheme. Head of Communications Tory Relf told the Herald, “Now that KiwiSaver is out there, it’s not needed at all.

“They can partake in any scheme same as any other worker up and down the country.

“If it’s good enough for you and me, it’s good enough for them”.

Chris Knox is a scientist turned data-journalist who investigates the stories behind the numbers, and creates interactives for Herald readers to explore them.