Report on the 2019 Review of Retirement Income Policies. Video / CFFC Media
New Zealand doesn't need to increase the age of eligibility for New Zealand Superannuation and can afford to keep it at 65 for at least the next 30 years, a report by the Interim Retirement Commissioner says.
The view is in sharp contrast to two previous reviews of retirement income policy which both recommended an age rise to 67 due to the rising cost of NZ Super as more people head into the over 65 age group.
The previous National-led Government announced plans to raise the age from 65 to 67 by 2040 in March 2017 on advice from the previous Retirement Commissioner Diane Maxwell after her 2016 review.
But when National lost the last general election in 2017 Labour scrapped the idea and Prime Minister Jacinda Ardern has said she would resign before raising the NZ Super age.
Recommending an age rise would have been politically unpopular with the Labour Coalition Government and unlikely to get any traction in an election year.
Justifying its change of heart Interim Retirement Commissioner Peter Cordtz said latest Treasury projections showed the cost of Super was sustainable, for at least the next 30 years and that raising the age would do more harm than good.
Peter Cordtz, Interim Retirement Commissioner. Photo / File
Treasury predictions in 2016 showed the cost of NZ Super is due to rise from 4.8 per cent of GDP to 7.9 per cent of GDP by 2060 while the cost of financing debt will rise from 1.6 per cent of GDP to 11 per cent driven in part by the increased cost of NZ Super and providing healthcare to an ageing population.
But the report notes that the figures have been criticised for not taking into account the fact that tax contributions from those 65 and over will also rise and the impact of the New Zealand Superannuation fund which will start to contribute towards the cost of NZ Super by the mid 2030s.
It says the cost is likely to be between 6 and 7 per cent after tax by 2060 which is still below the proportion of GDP that many other developed countries already pay.
Cordtz said its research showed raising the NZ Super age would do more harm that good because more people will be in need of state support as they enter retirement in coming years, not fewer, due to declining home ownership, rising levels of debt and the changing nature of work inhibiting people's ability to save.
"This requires more work to be done across government to help people prepare for retirement, in areas of housing, work, KiwiSaver and enhancing New Zealanders' financial capability."
Instead Cordtz recommends keeping NZ Super at its current settings for future generations and to reassure young Kiwis that it will still be there for them in the future.
"It was apparent from submissions and focus groups that younger New Zealanders, as well as their parents and grandparents, 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'," says Cordtz.
"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."
Cordtz said it was enough for younger New Zealanders to have to worry about where they will live and how they will earn enough to support their and their families' current and future wellbeing, without having to face additional uncertainty as to whether they will lose the Government backstop.
The 2019 review includes a raft of 19 recommendations most of which involve the retirement savings scheme KiwiSaver.
It wants to introduce a "small steps" employee contribution programme for new and existing members that would allow contributions to step up by 0.5 per cent a year to a maximum of 10 per cent.
The recommendations also include phasing in compulsory employer contributions for over 65 year old workers, ditching the ability for employers to include KiwiSaver contributions as part of a total remuneration package and establishing a central financial capability hub to deal with hardship claims.
It also wants beneficiaries to be auto-enrolled in KiwiSaver but with the government making the contribution and the government to contribute to the accounts of those who step out of paid employment to care for family.
The report will now go to the Government who will decide which, if any, recommendations it will follow through with.
