Warnings of debt in old age
New Zealand’s pension system is the eighth best in the world, but there is still work to be done.
The Melbourne Mercer Global Pension Index has given New Zealand’s pension fund a ‘‘B’’, in line with Chile, Finland, Norway, Singapore and others.
But the current system won’t be sustainable as boomers age and KiwiSaver contributions stay the same, the report found.
Mercer New Zealand chief executive Martin Lewington said the results needed to be taken in context with what the country was trying to achieve. ‘‘A ‘B’ is a pretty good outcome but if we aspire to an ‘A’ there are things that need to be worked on,’’ he said.
Areas of possible improvement included changing the eligibility age for the pension, increasing older workers’ participation in the workforce, increasing KiwiSaver contributions and household savings and reducing debt levels.
One global trend highlighted was the relationship between pension assets and household debt. As people saved more money, they also increased their levels of debt with things like additional property.
The lack of buffer between savings and debt could be a source of future stress, Lewington said.
If nothing changed in terms of personal and policy approaches to retirement and superannuation, the pension picture will deteriorate, he said.
Total funds in KiwiSaver for the 2019 period were just over $57 billion, up 17 per cent from last year, the Financial Markets Authority said in its annual report. The number of KiwiSaver members has risen to more than 2.9 million, up 3 per cent.
Lewington said there were steps people could take to shore up their level of comfort when they reached retirement age. ‘‘You really want to make sure you have a diversified pool of assets that is going to produce you the level of income you aspire to in those years when you are out of the workforce and you need to make sure it lasts as long as you do.’’