A plan for the future
PRIME Minister Bill English this week did what many were expecting in extending the retirement age to 67, but in an election year, it could prove to be a make or break decision for the Government.
Mr English was initially reluctant to outline his superannuation vision, saying he would do so before the September election but, whether due to political or public pressure, announced his plan late on Monday. His predecessor, John Key, was adamant there would be no changes to superannuation under his watch. But now he is gone and Mr English had his first real opportunity to make a statement as Prime Minister.
The changes mean if you were born after July 1, 1972 you will have to wait until 67 to get your pension. New immigrants who arrive after the law has changed will have to live in New Zealand for 20 years, rather than 10, to qualify for superannuation.
The raising of the age to 67 is no real surprise but, given the next election is six months away, Mr English is hinging his bets and, some will say, has not been decisive enough.
The changes are not scheduled to become law until next year and will not start to take effect until 2037. Mr English also conceded he could leave the eligibility age at 65 if that was a requirement of National’s coalition partners. He is hoping by pushing the start date out it will reduce the political impact. Act is the only party which has publicly supported raising the eligibility age to 67 which means a change of Government at the election will likely see the law tossed out.
Labour has in the past called for changes to superannuation, but that failed to see them close the gap on National in recent elections. Leader Andrew Little has opted for a different stance. He would not raise the age but would resume contributions to the New Zealand Superannuation Fund, which National suspended.
In reality, superannuation had to be addressed at some stage and many New Zealanders, albeit reluctantly, accept that. A Westpac FinEd Centre report late last year, part of a 20year longitudinal study, revealed 84% of participants, who are now aged between 21 and 26, believed the age of superannuation would be raised by the time they reached retirement.
Australia is already on the move. Its retirement age will be pushed out to 67 by 2023.
New Zealanders are living longer and the cost of superannuation is increasing. About $11 bil lion is spent annually but by 2031 it is forecast to cost $20 billion a year. Retirement Commissioner Dianne Maxwell has estimated the number of people reaching 65 in the next 30 years will double and she has openly supported changes to the retirement age.
Ms Maxwell said an ageing population ‘‘is a challenge of our times’’ and it required leadership from the Government to sort the matter out.
But her plan would have gone further than Mr English’s. She would make no changes for the next 10 years, meaning those now aged 55 will not be affected. From then, the retirement age would be raised by three months each year until it reached 67 in about 2035.
After decades of working and paying taxes there is an argument New Zealanders should be entitled to retire at 65, if they wish. They have earned the right to take a more relaxed approach to life or the opportunity to focus on the things that are important to them. Those in physical and manual jobs throughout their careers may struggle to continue work beyond 65.
But there are just as many people who believe 65 is too young to retire. You only have to look at workplaces throughout New Zealand to find plenty of staff aged 65plus and still working as efficiently as they were when in their 40s or 50s.
There appears no easy answer for Mr English, particularly as a wrong move could cost votes in election year. But the retirement age is a debate New Zealand has to have, sooner rather than later.