Let individuals choose when to retire - Brash

BY TRACY WATKINS
Last updated 05:00 22/07/2010

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Former National leader Don Brash has waded back into the retirement debate, suggesting future governments let workers decide for themselves what age to retire.

His call coincides with a major retirement income policy seminar in Wellington this week where there are expected to be calls for compulsory superannuation to help prepare for a looming "silver tsunami".

Dr Brash is also raising the alarm over New Zealand's ageing population. In a speech to an Auckland business audience yesterday, he said workers should be able to decide what age to collect a pension, with the rate determined by the age at which they start.

He said 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, he said.

"If the age of eligibility were 67, for example, under a policy allowing flexibility regarding the age at which it could be drawn, somebody might choose to take the pension at, say 65. At that younger age, the amount received would be actuarially adjusted downwards and would remain at that lower level ... until death."

If someone wanted to wait till they were 70, however, the amount received would be adjusted upwards, Dr Brash said.

"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."

Retirement Commissioner Diana Crossan said the seminar, organised by the Institute of Policy Studies, was focusing on the economics of the ageing population – "can we afford it, how do we afford it, what are we going to do?"

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A spokesman for Finance Minister Bill English said the Government had made it clear there would be no changes to NZ Super – either to the age of eligibility or minimum payments.

"This is built into the Government's long-term spending path and fiscal forecasts."

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