Playing the ageing game

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THE FINANCIAL crisis has highlighted the unfairness of lifting the age of eligibility for state pensions, a visiting academic has told New Zealand's Retirement Commission.

All around the world governments have been lifting the age at which people can draw a pension from the state as a way of reducing the cost of providing an income for their ageing populations, said professor Alan Walker from Sheffield University in England.

Recent examples among OECD nations include Austria, Belgium, Finland, France, Greece, Italy, Portugal, Sweden, Switzerland and the UK, and though John Key has kicked the issue into touch here while he is prime minister, New Zealand is widely expected to eventually follow suit as our grey population explodes.

But Walker said such a move would be wrong without tackling endemic issues of ageism and the longer lives enjoyed by professional workers compared to those in back-breaking manual work.

While raising the age of eligibility has been kicked into touch for the moment by Key, Walker predicted it would be revived here, and indeed the Treasury has done the numbers on how much lifting it to 67 would save the country.

"It's been kicked into the long grass here, but someone will fetch it out again," Walker said, but he warned such a policy on its own would increase social injustice.

Firstly, in financial crises, it tended to be older workers who lost out, both because they were tempting targets to trim from the payroll and were the last to be re-employed when the economy improved.

That led to many having to spend their savings before falling back on state benefits. They lost the opportunity to save nest eggs, something that many people do only after they have paid off the mortgage.

"In Britain in the 1980s, people were made redundant in their 50s and many never worked again," Walker said. "They lived in poverty until they retired and [because British state pensions are based on multiples of a person's earnings] their pensions were reduced and they lived in poverty after they had retired."

That meant lifting the age for NZ Super would be unfair without tackling ageism, which he said was a silent and persistent problem, in part caused by a skills gap – companies targeting training only to younger employees.

Though the population is ageing, he said, New Zealand could not rely on societal attitudes changing and older people's job prospects for life improving. "Age discrimination is a real barrier. We just can't leave it for some sort of magical transformation."

Walker also said lifting the age of eligibility was unfair to people in hard manual jobs as they tended to die earlier. Already longer-lived professionals got to enjoy many more pensions payments, he said.

He said New Zealand could learn from Finland in the way the country was focusing on policies to promote what he called "active ageing". This could involve government incentives to firms to employ older workers, as well as doing more to generate a sense of solidarity between generations.

Though such policies would bring costs, which were unpalatable in the current climate, Walker said an ageing population meant there would have to be some redistribution of resources as the population aged.

Retirement Commissioner Diana Crossan, in Washington to brief the Obama administration on KiwiSaver, said the first priority for NZ Super was stability, but some of the points raised by Walker should be debated, particularly the inequalities that surround lifting the age of eligibility.

While New Zealand ranked as having the lowest levels of superannuitant poverty in the OECD – everyone gets a basic pension pitched just above the poverty line – she said even small shifts in policy could cause dramatically worse outcomes.

Dropping NZ Super payments for a married couple from 65% of average net ordinary-time wages to 60% would put the country at the bottom of the OECD rankings.

Lifting the age of eligibility is also not unprecedented here. New Zealand did it back in 1991, introducing law changes that progressively lifted the age of eligibility from 60 to the current 65.

- © Fairfax NZ News