Retirement income too political

ANY reference to retirement income in New Zealand is politically fraught, so it is probably too much to expect that this year we might be able to have a mature discussion about it.

Often, it seems the only thing many people want to talk about is the eligibility age for national superannuation.

Should it stay at 65, go up to 67 gradually, or should we be able to qualify for national superannuation at a variety of ages to allow for workers’ differing circumstances?

It is worth noting that the age of eligibility used to be 60. In 1992, it went up to 61, and then gradually increased to 65 between 1993 and 2001.

Labour, Greens and New Zealand First support the current age of entitlement but National’s policy is to increase it to 67, a gradual process which would begin in 2037.

Those vehemently opposed to raising the age, even over a long period, point to the hardship this might pose for those in physical jobs without much private retirement income and who are desperate to finish work at 65. The inequity for those with lower life expectancy, particularly Maori, is another issue which cannot be overlooked.

Fears that universal national superannuation in its current form will eventually be unaffordable have also loomed large.

It is a pity the report of the threeyearly review of retirement income policies, from interim retirement commissioner Peter Cordtz, has landed at the beginning of an election year when superannuation is unlikely to escape being a political football.

Contrary to the two previous reviews which wanted the age of eligibility for superannuation raised as it was deemed unaffordable, Mr Cordtz says the latest treasury projections show the cost is sustainable for the next 30 years and raising the age would do more harm than good.

He says more people need state support due to declining home ownership and rising debt, and the changing nature of work will inhibit ability to save.

Younger New Zealanders have enough to worry about — where they will live and how they will support their families’ current and future wellbeing — without facing additional uncertainty about whether they will lose an effective government backstop, he says.

Accordingly, the majority of the 19 recommendations in his report relate to KiwiSaver.

One of the more controversial ideas in the report is the possibility of removing the sixmonth owneroccupier requirement for people using their KiwiSaver towards buying their first home.

The reviewers heard people were already ignoring this. There were also young people being unable to afford a house in the city where they might be working, and wanting to buy a property in their home town with the intention of retiring there later.

Opposition to this included those who understandably feared the impact on the sensitive housing market, and on smaller communities and rural areas where affordability is already becoming a problem for locals.

Rather than recommend a change outright, the reviewers want the potential range of impacts modelled and explored further, working with the Ministry of Housing and Urban Development.

Other recommendations include phasing in employer contributions for KiwiSaver members who are still working over the age of 65 and also to look at the implications of doing this for those under 18.

One welcome recommendation is that for the phasing out of the ‘‘total remuneration’’ package for employees where the employer contribution is incorporated in the wages paid to the employee, meaning effectively the employee is paying the employer contribution.

This often affects lowpaid nonunionised workers and is likely to be poorly explained.

Whether much notice will be taken of the report remains to be seen. One sensible recommendation, which might damp down the politics and improve the effectiveness of future reviews, is that the review should be held in the year after an election, rather than the year before.