Hide warns of longer wait for less pension cash

People approaching retirement in the years ahead face the prospect of working past 65 and existing on a pension lower than it is now, says Act Party leader Rodney Hide.

"Politics can't beat arithmetic," he told a retirement income conference in Auckland yesterday.

"There are five workers per retiree now. The projection is for there to be only two workers per retiree in 2050."

Mr Hide said the number of over-65s was set to more than double over the next 40 years, while the workforce would grow by only 10 per cent.

"What we don't see is politicians promising to increase income tax by 25 per cent - but that's the arithmetic of the number of elderly more than doubling."

Mr Hide said the Government's superannuation fund was "a cost-smoothing exercise" which was not going to change the situation.

"The age of the pension will be shifted out to 67 or 68, and it is inevitable that the pension's value as a percentage of the average wage will be dropped, just like it has been in the past," he said.

Mr Hide accused previous governments of not telling the truth about superannuation because politicians feared they would lose votes if they did.

He suggested accountability should be forced on governments, so they did not make promises they knew they could not keep.

His answer to the pension problem was increased economic growth and prosperity, which he said could be achieved by lower taxes.

"Averaging 5 per cent growth a year instead of 2 per cent would make us four times richer in 50 years. Being four times richer would leave us easily able to look after the retired."

The conference was organised by the Association of Superannuation Funds.

Associate Finance Minister David Cunliffe said people were not joining workplace super schemes in the numbers they used to, but the schemes were still an important way to get enough money for retirement.

Government super was adequate for day-to-day living, but for those who wanted more it was crucial to have their own funds to draw on.

Green Party co-leader Rod Donald said the industry had to wear its share of responsibility for the low level of private savings.

"The public do not have the confidence they deserve to have in super funds, often because they were led to expect unrealistic rates of return and have instead seen their savings shrink as a result of poor investment decisions," he said. "Solving your credibility problem is ... a prerequisite to New Zealanders becoming better private savers."

Mr Donald said his party was confident New Zealand could afford to keep the current scheme going for the foreseeable future, and did not accept that the Government's superannuation fund was necessary.

- NZPA