Pension-age certainty urged
New Zealanders are approaching retirement in poorer shape than their parents’ generation did – and that means we cannot afford to raise the pension age, the Retirement Commission says.
The commission has long argued that an increase in the age of eligibility for state superannuation is needed because of the cost of providing it to an increasing number of older people.
But now acting commissioner Peter Cordtz has issued recommendations that backtrack on that advice. In the commission’s latest three-yearly review of retirement income policies, Cordtz said new projections by the Treasury showed that New Zealand Superannuation in its current form was sustainable for at least the next 30 years – and raising the age could do more harm than good.
The commission was tasked with looking at wellbeing issues as well as fiscal sustainability.
Superannuation costs an amount equal to 4.8 per cent of national gross domestic product (GDP) at present. But Cordtz said that might not rise as sharply as earlier predictions had indicated. A calculation by the Council of Trade Unions included in its submission to the review said the cost would rise only to 5.9 per cent net of GDP in 2060. The Treasury predicts a net 6.6 per cent.
Cordtz said it was undeniable that the cost of NZ Super would increase, but even at 7 per cent it would be a smaller percentage of GDP than some other countries were already dealing with in sustainable pension systems.
‘‘It is sustainable for at least another 30 years. There is time to address that sustainability issue.’’
He said retirees of the future would approach the end of their working lives in a worse financial state than current retirees because of declining rates of home ownership, and changes in employment and income patterns.
Rising levels of debt and the changing nature of work made it harder for people to save, he said.
‘‘All these things show that tomorrow’s retirees are going to be in much worse shape and will require more help.’’
The review noted a downward trend in home ownership. The proportion of people aged over 65 who own a home without a mortgage has dropped from 83 per cent in the mid-1990s to 72 per cent.
‘‘It was apparent from submissions and focus groups that younger New Zealanders ... are concerned that NZ Super will not be available to future retirees, or at adequate levels. We received a lot of comments to the effect that ‘Super won’t be there for us’,’’ Cordtz said. ‘‘This uncertainty is causing unnecessary stress, and we think should be put to bed so New Zealanders can have certainty that NZ Super will provide a stable level of state support for them to plan around . . .’’