Brash urges pension flexibility

01:20, Jul 21 2010

Workers should be given the choice over the age they start collecting a pension, with financial incentives offered to those who prefer to keep working into their late 60s and beyond, says former National leader and 2025 Taskforce Chairman Don Brash.

Dr Brash's call coincides with a major retirement income policy seminar in Wellington this week and comes amid warnings that a "silver tsunami" is approaching.

In a speech to an Auckland business audience today, Dr Brash said New Zealand Super was a good scheme and should be retained.

But changes to the age of eligibility were inevitable as the number of retirees soared in comparison to the number of workers.

"The acceptance of this would be greatly helped if we allowed people much greater flexibility as to when they actually start drawing the pension, with those who chose to draw the pension down early being paid a lower rate over the rest of their lifetime compared with those who chose to draw the pension down later.

"That flexibility would have substantial indirect fiscal benefits but, arguably, even more important, it would encourage older New Zealanders to stay productively engaged in the community."

Such a system would also give people a greater degree of choice about when to retire.

"It would not directly reduce the fiscal cost of New Zealand Super of course - by definition, the amounts paid would be actuarially equivalent to drawing the pension at the age of eligibility.

"But by encouraging people to stay in the workforce for longer it would have fiscal benefits in terms of higher tax revenue and probably lower health costs given that there is evidence that people who remain employed are often healthier, physically and mentally, than those who have left the workforce."