Business: Super shock

Commentators say 2037 target for raising pension age to 67 gives time to adjust

A20-year wait in lifting the age for superannuation eligibility from 65 to 67 will give the country time to adjust and manage the change, say business commentators.

Prime Minister Bill English yesterday announced plans to begin progressively lifting the age of eligibility from 65 to 67 in 2037.

The Government will not act on the promise until after the general election in September and English said the major change would be legislated for next year.

English also plans to limit superannuation eligibility to people who have lived in New Zealand for 20 years, rather than 10 years.

Economists said the 20-year phase-in period would give savers time to adjust to the new rules. A long lead time had been used in other countries facing similar issues.

“The reality is that we are living for longer and we are working for longer as well,” ASB chief economist Nick Tuffley said. “Changes like these reflect those shifts.

“When you are making changes, particularly when it comes to retirement savings where individual savings take place over a long time, you do need to give people a bit of advance warning.”

Government data released with the decision showed that there are about 100,000 people working in the 65-to-69 age bracket, compared with just 15,000 in 1997.

ANZ senior economist Phil Borkin said the political decision to extend the retirement age to 67 was always going to happen at some stage.

“It was just a question of when and how they would go about that change and whether there was a political appetite to do that,” he said. “The decision needed to be made. It was logical to phase it in [over 20 years] and not to shock people.”

Employers and Manufacturers Association chief executive Kim Campbell agreed that 2037 seemed a long way off but said people had to be given time to adjust.

The discussion around changes to superannuation was “politically toxic” but ignoring it was irresponsible, he said.

“It would be foolish for everyone to ignore it.”

Campbell said the pension was only “part of the puzzle” around retirement.

“We need to talk about how New Zealanders save, their appetite for debt, the kinds of things they do to prepare themselves for retirement — which includes having a debt-free home when they retire — all those public policy issues need to be discussed exactly at the same time [as superannuation],” he said.

BusinessNZ chief executive Kirk Hope said lifting the pension age was “fiscally prudent” and should not have any big implications for the business community.

“We’re already thinking about ways that we can as business manage an older workforce.”