Is 6.4 per cent of gross domestic product too much for a quarter of our population? Photo / 123rf.com, File
Is 6.4 per cent of gross domestic product too much for a quarter of our population? Photo / 123rf.com, File
Opinion
OPINION
Forty per cent of people aged 65 and over have virtually no other income besides NZ Super.
Another 20 per cent have only a little more. Even with NZ Super, close to one in three of us don't think we'll have enough for our retirement unless we continue workingpast 65.
NZ Super is especially important for those with disabilities, carers, those who have had irregular periods of paid work, or were low-paid throughout their working lives. In many cases, it can provide a greater level of financial security than some may have experienced before.
It's no secret that Aotearoa has an ageing population. In 2018, those aged 65 and over made up 15 per cent of the population. By 2048, this is expected to hit around 25 per cent. This means expenditure on NZ Super will increase – but what would our country look like without it?
NZ Super exists to ensure an adequate standard of living for New Zealanders of eligible age.
Already we're seeing a growing number needing to continue working longer because they still have mortgages to pay, are paying rent, or haven't been able to save enough. MSD reports a steady rise in pensioners applying for the additional means-tested accommodation supplement.
Yet, despite the value that NZ Super brings to so many (and this goes beyond those who receive it) the debate around affordability is often launched with an imperfect problem definition and a narrow range of possible solutions, like raising the eligibility age or introducing means testing.
A recent opinion piece questioned whether access to universal superannuation is outdated, arguing that it is time to look at means testing. The writer himself admitted choosing to access the pension, having had long-term employment, employer contributions to his retirement fund, and being a mortgage-free homeowner.
In some ways, this is the current stereotype – wealthy Boomers who don't need the money. But the stark reality is that more people are relying on NZ Super than ever. Research coming out of the upcoming 2022 Review of Retirement Income Policies points to how critical NZ Super is to our retirement income framework. A growing number perceive it to be insufficient to cover even a basic standard of living.
The next generation of retirees won't be in the same position as the current ones. We have the lowest home ownership rate since 1951. Future pensioners will pay rent or still be paying mortgages, and have higher retirement expenditure, than previous generations. KiwiSaver has only been around for 15 years, and many will struggle to amass adequate private savings in their working lifetime. Every piece of research points to people needing NZ Super, and then some.
Whether NZ Super itself will continue to adequately alleviate poverty for future superannuitants is the bigger question.
As part of the 2022 Review of Retirement Income Policies, we have talked to older New Zealanders about their "retirement" experiences. Many highlighted how important receiving NZ Super was.
A male participant from the North Island said, "I'd probably be living on the streets without it." Another in Auckland joked about resorting to "bank-robbing" if he didn't have it. "It's not enough, but I'm very grateful."
Stories from Māori, Pacific peoples and women are even direr. They head into retirement financially worse off, and lower life expectancy means many die before 65.
Women also go into retirement financially worse off – gender pay gaps become retirement pay gaps. NZ Super is a key source of income for older women, especially women living alone. Women live longer in retirement and need to stretch their income further.
It's also worth considering how much "return" we get for the expenditure on NZ Super. The gross expenditure is forecast to represent 6.6 per cent of GDP by 2045 and 7.7 per cent by 2061. But these are blunt figures, net expenditure is more accurate because NZ Super is taxed, so now we're talking about 5.5 per cent of GDP by 2045 and 6.4 per cent by 2061.
Is 6.4 per cent too much for a quarter of the population?
Jane Wrightson. Photo / Elias Rodriguez
Last year, older people contributed an estimated $13-$15 billion of unpaid and voluntary work - projected to increase to $64-$71 billion per year by 2071.
Importantly, NZ Super underpins a stable and consistent retirement income system to encourage people to plan, and add private savings, over a long period of time.
Any changes to retirement policy need to be based on a principled approach. What is the purpose of the change? Who will it benefit? Who will it hurt? What is the true cost? What do we want for older New Zealanders?
Issues need to be widely debated and a broad range of voices heard – especially those outside our bubbles.
Ultimately, our retirement income system should focus on allowing older New Zealanders to live with dignity and mana. This means being able to participate and contribute to society and enjoy a high level of belonging and connection to whānau, community and country. NZ Super is a key contributor to this.
