‘KiwiSpend’ could eke out retirement income

KiwiSavers’ nest eggs should be transferred into a stateguaranteed scheme at age 65 to provide them with incomes for life, pensions experts say.

The proposal, dubbed KiwiSpend, came in a report prepared for the Commission for Financial Capability by Susan St John and Claire Dale from Auckland University’s Retirement Policy and Research Centre.

KiwiSpend could be used by people to supplement NZ Super to live comfortable lives in retirement, without running the risk of outliving their savings, seeing them eaten away by inflation, or being lost in unsuccessful investments or financial exploitation, they said.

People who did not want an inflation-proofed KiwiSpend annuity could ‘‘opt out’’ and choose what to do with their nest eggs, the report says.

The modelling suggested a ‘‘fair price’’ for a $12,000 KiwiSpend annuity would be $158,000 to $174,400 but St John and Dale said the scheme might require taxpayer subsidies.

Interim retirement commissioner Peter Cordtz said the KiwiSpend idea, which was a suggestion up for discussion in the three-yearly review of retirement income policies, merited debate. ‘‘Many people we have spoken to in our research for the review say they are worried they will run out of money in retirement,’’ he said.

But pensions expert Michael Littlewood said there was no evidence people were making bad decisions with their money in retirement.

St John and Dale said: ‘‘One potent argument is that annuitisation prevents the consumption of the lump-sums too early in retirement and provides for ... future healthcare costs, including long-term care that may otherwise become a cost to the state.’’