Is lift­ing the re­tire­ment age re­ally in­evitable? Ex­perts weigh in


At what age do you hope to start get­ting the pen­sion? For­mer ANZ chief economist Cameron Ba­grie reignited the de­bate this week when he said it would not be able to re­main at 65.

Na­tional com­mit­ted to in­creas­ing the age by two years in 20 years’ time, but that was scut­tled when they were pushed out of govern­ment in the most re­cent election.

Ba­grie said, with an age­ing pop­u­la­tion, there would be fewer work­ers sup­port­ing more re­tirees.

‘‘It doesn’t look good. Some­thing has to be done. Rais­ing the re­tire­ment age at some stage, is, I think, in­evitable.’’

Is change in­evitable?

Many agree with Ba­grie. By in­ter­na­tional stan­dards, New Zealand’s pen­sion is gen­er­ous be­cause it’s given to every­one. All you need to do is turn 65. Other coun­tries are al­ready push­ing up their age of el­i­gi­bil­ity.

As part of her most re­cent pol­icy re­view, Re­tire­ment Com­mis­sioner Diane Maxwell called for the age of el­i­gi­bil­ity to in­crease here to 67 by 2034.

She said that would re­duce the cost of the scheme by 10 per cent, or $3.56 bil­lion a year.

Economist Shamubeel Eaqub said there was no dis­agree­ment among com­men­ta­tors and pol­i­cy­mak­ers that some­thing had to change. The is­sue was get­ting politi­cians to agree, he said.

Labour cam­paigned at the 2014 election on the prom­ise that it would in­crease the age, but has since done a U-turn.

‘‘It’s af­ford­able for now and we don’t tend to deal with things un­til they are well and truly bro­ken,’’ Eaqub said.

‘‘We shouldn’t ex­pect some­thing that’s so dis­tant is go­ing to be ex­er­cis­ing the minds of politi­cians who’ve ex­plic­itly promised it’s not go­ing to change.’’

He said politi­cians did not want to up­set vot­ers, who were of­ten the part of the pop­u­la­tion clos­est to re­tire­ment and saw the pen­sion as an en­ti­tle­ment.

Jess Ber­entson-Shaw, codi­rec­tor of re­search and pol­icy col­lab­o­ra­tive The Work­shop, said the is­sue was the cost of the pen­sion com­pared with other so­cial wel­fare spend­ing.

‘‘Up un­til now the ap­proach has been to squash other so­cial spend­ing while keep­ing su­per at the same level. As an ap­proach to sup­port­ing your pop­u­la­tion it does not re­ally work, as fail­ing to en­sure the young gen­er­a­tion thrive will cre­ate a prob­lem with the next group of re­tirees.’’

How­ever, she said rais­ing the el­i­gi­bil­ity age had the po­ten­tial to dis­ad­van­tage Maori, who have a lower life ex­pectancy, as well as those with dis­abil­ity or health is­sues, who needed to re­tire early.

Maybe we shouldn’t touch it

Michael Lit­tle­wood, for­mer codi­rec­tor of the Auck­land Univer­sity Re­tire­ment Pol­icy and Re­search Cen­tre, says it’s in­cor­rect to say that our pen­sion sys­tem is un­af­ford­able.

Es­ti­mates are that the cost of su­per­an­nu­a­tion could rise to 7.9 per cent of New Zealand’s GDP by 2060. But Lit­tle­wood said that in it­self did not pose a prob­lem.

Other OECD coun­tries al­ready paid more than that, he said.

New Zealand should not just move be­cause other coun­tries were. ‘‘As with any­thing, it’s how the Govern­ment spends its money. It’s a ques­tion of pri­or­i­ties.’’

The $40 bil­lion ques­tion

Ki­wiSaver hov­ers around the edges of pen­sion con­ver­sa­tions.

Of­fi­cially, it’s a scheme de­signed to sup­ple­ment what Ki­wis get from the Govern­ment in re­tire­ment. But how long be­fore we rely on it to play a big­ger role?

There are about 2.5 mil­lion of us en­rolled in the scheme and more than $40 bil­lion in­vested so far. If it were made com­pul­sory, which is eas­ier now that there’s no $1000 in­cen­tive at­tached for new en­rol­ments, it could be leant on by a govern­ment seek­ing to make the pen­sion less gen­er­ous.

A few prob­lems would need re­solv­ing first, though.

Last year, more than a mil­lion Ki­wiSaver mem­bers did not put in enough money to re­ceive their full mem­ber tax credit. That means they put in less than $1042 over the course of the year. Even over 40 years, sav­ing at that rate wouldn’t give you a lot to live on.

The Govern­ment could opt to means-test pen­sions, although this would be po­lit­i­cally un­palat­able.

Ber­entson-Shaw said to­tal wealth and in­come test­ing, though com­pli­cated, was a bet­ter op­tion than means test­ing.

‘‘The com­pli­cat­ing fac­tor is hous­ing. Older peo­ple of this gen­er­a­tion do bet­ter now be­cause many have no ac­com­mo­da­tion costs, so su­per in the main works to en­sure a cer­tain stan­dard of well­be­ing. This will not be true in the near fu­ture.’’


Cameron Ba­grie: ‘‘Rais­ing the re­tire­ment age at some stage, is, I think, in­evitable.’’

Re­tire­ment Com­mis­sioner Diane Maxwell wants the age of el­i­gi­bil­ity to in­crease to 67 by 2034.

Jess Ber­entson-Shaw says the is­sue is the cost of the pen­sion com­pared with other so­cial wel­fare spend­ing.

Michael Lit­tle­wood: ‘‘It’s a ques­tion of pri­or­i­ties.’’

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