Kiwis need to face retirement facts
Financial services bosses say Kiwis need to face the harsh reality that they will inevitably have to bear more of the cost of their own healthcare and retirement.
AMP Financial Services managing director Jack Regan, speaking at a Trans-Tasman Business Circle panel discussion on retirement, titled Will Your Money Run out Before Your Body?, said the country was spending about 11 per cent of GDP on health and retirement income.
By 2035 that will probably have jumped higher than 15 per cent, opening up an estimated $40 billion funding gap.
The strain that the aging population will place on state-funded healthcare and superannuation has been well documented, especially by the Retirement Commission.
However, repeated calls to gradually raise the retirement age to 67 have been rejected by Prime Minister John Key, and the Labour Party has softened its initial stance to a maybe.
Regan said the possibilities essentially came down to the Government taking on more debt, lower living standards, or reduced government services in other areas, none of which were very attractive.
Instead, he said the only real solution was probably a set of policies encouraging people to self-fund.
Industry-led solutions like annuities or reverse mortgages, which allow elderly homeowners to tap into the equity in their property, were problematic because they were capital-intensive.
''The difficulty is coming up with products that don't put people in peril,'' Regan said.
''Nobody wants to put guarantees behind these any more, because it just costs a lot of money.''
Ian McPherson, chief executive of member-owned Southern Cross Healthcare, said there needed to be more honesty and discussion around the scale of the issue.
''I can understand why politicians don't want to talk about it, because it's not very popular, it's not going to get them elected.''
McPherson said he knew the Government would not take care of him when he retired, and his children needed to know that too.
He said most people simply were not aware of the true costs of healthcare, with research showing those over 65 had only put aside a paltry $30,000 for medical bills.
''I think it is inevitable - and this is the political dynamite bit - that New Zealanders are going to have to pay more for their healthcare,'' McPherson said.
Former politician Simon Power, who heads Westpac's private wealth and insurance division, said the framing of the debate needed to focus more on the needs of actual savers.
''These discussions can often come down to, if we just pull this macro-economic lever, everything will be fine,'' he said. ''[But] I'm not sure.''
Power said we needed to think hard about the education and financial literacy component, as well as whether current policy settings were working.
For example, he said he was a huge supporter of KiwiSaver, but questioned whether it would have been designed the same way, in hindsight.
''It's just as it matures, we get the opportunity to think about it slightly differently.''
The panel encouraged companies present at the briefing to speak out on retirement-related issues, rather than leaving it solely to industry groups.
However, they acknowledged they ran the risk of being perceived as only acting in their own self-interest