Otago Daily Times

Cri­sis to bur­den pre­re­tirees, com­mis­sioner warns

- TAM­SYN PARKER Oceania News · Retirement · Employment · Society · Greater Auckland · New Zealand · Jacinda Ardern

AUCK­LAND: The Re­tire­ment Com­mis­sioner is wor­ried about the fi­nan­cial im­pact of Covid­19 on pre­re­tirees and wants the Gov­ern­ment to con­sider up­ping the fi­nan­cial in­cen­tives to put more into Ki­wiSaver.

A global re­view of re­tire­ment in­come sys­tems by ac­tu­ar­ial con­sul­tants Mercer gave New Zealand’s sys­tem a B rat­ing and warned the eco­nomic im­pact of Covid­19 would heighten the fi­nan­cial pres­sures many re­tirees faced.

Mercer se­nior part­ner David Knox, the study’s lead au­thor, said the re­ces­sion caused by the global health cri­sis had led to re­duced pen­sion con­tri­bu­tions, lower in­vest­ment re­turns and higher gov­ern­ment debt in most coun­tries.

‘‘In­evitably, this will im­pact fu­ture pen­sions, mean­ing some peo­ple will have to work longer while oth­ers will have to set­tle for a lower stan­dard of liv­ing in re­tire­ment.

‘‘It is crit­i­cal that gov­ern­ments re­flect on the strengths and weak­nesses of their sys­tems to en­sure bet­ter long­term out­comes for re­tirees.’’

Re­tire­ment Com­mis­sioner Jane Wright­son, who took up the role in Fe­bru­ary — just six weeks be­fore New Zealand’s lock­down, shared that con­cern.

‘‘Ab­so­lutely it is a clear and present dan­ger post­Covid, no ques­tion. The whole in­dus­try and big chunks of gov­ern­ment are wor­ried about ex­actly the same thing.’’

Ms Wright­son said the im­pact from Covid­19 in New Zealand was largely on pre­re­tirees.

‘‘Re­tirees of course have seen their in­vest­ment or sav­ings bal­ances go down and the low or no­interest en­vi­ron­ment cer­tainly doesn’t help. That will be eat­ing into their cap­i­tal a lot faster than they pre­dicted.’’

How­ever, re­search Ms Wright­son’s Com­mis­sion for Fi­nan­cial Ca­pa­bil­ity un­der­took dur­ing the first lock­down showed that co­hort was one of the most com­fort­able at present.

‘‘But the pre­re­tirees and the mil­len­ni­als have to think very hard now. The hard­est thing to think about is long­term sav­ing — this is go­ing to take the coun­try a long time to get over.’’

New Zealand’s gov­ern­ment debt lev­els have spiked with its Covid­19 re­sponse and are ex­pected to re­main high for years to come, prompt­ing some to call for the age of el­i­gi­bil­ity to rise to make the cost of su­per­an­nu­a­tion more af­ford­able.

Prime Min­is­ter Jacinda Ardern has ruled out rais­ing the age, but there are other tweaks that could be made to trim the cost.

Ms Wright­son said while Covid19’s eco­nomic ef­fect on pre­re­tirees was prob­a­bly not top of mind for the new gov­ern­ment, af­ford­abil­ity of New Zealand Su­per­an­nu­a­tion likely would be.

She said there was not enough data or anal­y­sis to back up the knee­jerk calls to raise the age of el­i­gi­bil­ity.

‘‘That is such a big pol­icy step, you have to have a very rea­soned and good an­a­lyt­i­cal as­sess­ment of the sit­u­a­tion and that is what we in­tend to do over the next year.

‘‘I want to prop­erly eval­u­ate that ar­gu­ment.’’

Ms Wright­son had just re­leased a mis­sion state­ment defin­ing the pur­pose of New Zealand’s re­tire­ment in­come sys­tem — the first time that had been done.

The mis­sion state­ment was formed us­ing an ad­vi­sory group of aca­demics and pol­icy spe­cial­ists.

It stated that the sys­tem was de­signed to pro­vide a sta­ble re­tire­ment in­come frame­work which en­abled trust and con­fi­dence that older New Zealand res­i­dents could live with dig­nity and mana, par­tic­i­pate in and con­trib­ute to so­ci­ety, and en­joy a high level of be­long­ing and con­nec­tion to their fam­i­lies, com­mu­nity and coun­try.

To help cur­rent and fu­ture re­tirees achieve this, the frame­work’s pur­pose was twofold: to pro­vide New Zealand Su­per­an­nu­a­tion to en­sure an ad­e­quate stan­dard of liv­ing for New Zealan­ders of el­i­gi­ble age, and to ac­tively sup­port New Zealan­ders to build and man­age in­de­pen­dent sav­ings that con­trib­ute to their abil­ity to main­tain their own rel­a­tive stan­dard of liv­ing.

Ms Wright­son said there would be a series of pol­icy pa­pers over the next year or two in very plain English that would be aimed at the gen­eral pub­lic so that peo­ple could un­der­stand the com­pet­ing ten­sions.

They would look at the af­ford­abil­ity ar­gu­ment, means test­ing and age el­i­gi­bil­ity.

She also wanted the Gov­ern­ment to think about how there could be bet­ter in­cen­tives for peo­ple to put money into Ki­wiSaver.

‘‘Be­cause that is the long­term key to the mil­len­ni­als — while it might cost the Gov­ern­ment money in the short term it re­ally does help al­le­vi­ate the long­term li­a­bil­ity.’’

Last year’s Re­tire­ment Pol­icy Re­view rec­om­mended the gov­ern­ment’s an­nual con­tri­bu­tion change to in­cen­tivise more vol­un­tary sav­ing to Ki­wiSaver by put­ting in $2 for ev­ery $1 up to $2000 per an­num. Cur­rently peo­ple get 50c for ev­ery dol­lar they put in up to $521 from the gov­ern­ment an­nu­ally.

Ms Wright­son said en­cour­ag­ing more per­sonal sav­ings could mean the gov­ern­ment could hold off on pen­sion in­creases in the fu­ture.

‘‘If there is ev­i­dence peo­ple have got a rea­son­able de­gree of sav­ing . . . the prob­lem of course is we are a low­wage econ­omy — so it is very hard to save long term and be­cause of that of course you need to start early, which is some­thing we al­ways mean to do and sort of for­get.’’ — The New Zealand Her­ald

 ?? PHOTO: THE NEW ZEALAND HER­ALD ?? Re­tire­ment com­mis­sioner Jane Wright­son.
PHOTO: THE NEW ZEALAND HER­ALD Re­tire­ment com­mis­sioner Jane Wright­son.

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