Call to link pension age to life expectancy
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We now live longer than ever so should the age of eligibility for NZ Superannuation be increased?
The age of eligibility for New Zealand Superannuation should be progressively raised in line with life expectancy.
And superannuation should no longer be linked to average wages, but have rises pegged to rises in the Consumer Price Index.
Those are the main recommendations from the draft Review of Retirement Income Policy by the Commission for Financial Literacy and Retirement Income released this morning.
In the review, which is done every three years in a bid to keep the politicians' minds focused on retirement policy issues, retirement commissioner Diane Maxwell calls for a debate on whether the age at which people can draw superannuation - at present 65 - should rise according to a formula as lifespans lengthen.
The aim of linking the age of NZ Super to longevity, which would see today's 25 year-olds getting NZ Super at 68 - although that could move out if lifespans continue to lengthen - would be to keep "the proportion of life over the age of 20 in receipt of New Zealand Superannuation be kept at a minimum of 32 per cent".
This would be done by establishing, before June 30, 2017, a schedule and review process for New Zealand Superannuation, that would herald a regular pushing-out of the eligibility age should life expectancy continue to rise.
Men and women would still get superannuation at the same age, despite women living longer.
Maxwell supported keeping NZ Super as a simple, universal state pension.
"It is simple to administer because it does not require lifetime earnings or contributions records to be kept," she said.
"It's clear set of individual, unconditional entitlements by virtue of citizenship, fosters social cohesion, and is part of our sense of national identity," she said.
But she added: "There is an increasing gap between the standard of living that NZS can provide for in retirement and the standard of living to which many aspire."
And, she said changes were needed because economic growth on its own would not get us across the line.
"One way to solve the problem is through economic growth but this is unlikely to be sufficient on its own," Maxwell said.
"A few policy changes will be needed to ensure that our system of retirement remains sustainable.
"Policy decisions should be made within the next four years, followed by a long period of notice (five to 10 years) before changes are actually implemented. This timeframe will allow New Zealanders to confidently plan for their retirements."
If change is needed, the Government isn't acknowledging it yet.
In a statement last night, Craig Foss' office said the Government remained "unequivocal" on superannuation remaining at age 65, and the married rate being no less than 66 per cent of the average wage.
Maxwell recommended that KiwiSavers would still be allowed to get at their balances at age 65, which would allow people to retire earlier than the age at which they got superannuation, if they wished, though there was already a growing number of people who chose to work past 65.
"There are many advantages to be gained from older New Zealanders continuing to participate in the workforce where they are able and want to do so," she said.
"Older workers contribute to economic growth, pay taxes which help fund retirement income and stay connected and healthier.
"The assertion that they displace younger workers is not supported by any evidence."
Germany, Finland and Portugal have already gone down the route of linking the age of eligibility for state pensions to longevity, and Britain is following.
In the last retirement policy review three years' ago, the former retirement commissioner Diana Crossan called for the age of eligibility to be raised to 67 by 2020.
- © Fairfax NZ News