Retirement age debate: Why NZ Super may need to change – Editorial
For decades, we’ve chased the pot of gold at the end of the retirement rainbow – most of us want to catch it before we’re too old to enjoy it.
The trouble is the end of the rainbow is getting further and further away and there are fewer and fewer taxpayers chasing it.
Politicians, and deep down, the rest of us, know it: change is coming.
It’s not ideal nor something we’d like to see in our lifetimes but the retirement age will rise.
And it would be a brave government that pulls that trigger.
Act Party leader David Seymour says it’s inevitable.
Government contributions to the New Zealand Superannuation Fund are forecast to total $3.1 billion over the next four years, $2.2b more than expected in the Half Year Economic and Fiscal Update in December, Finance Minister Nicola Willis said on Budget day.
Budget forecasts show the cost of New Zealand Superannuation growing rapidly as the population ages, from $24.7b in the current financial year to $31.2b in 2029-30, she said.
By 2037, superannuation is projected to be 21.35% of total taxation revenue – up from 17.62% this year, a Treasury response to an Official Information Act request said – leaving less money for other needs.
The response noted two key assumptions for the projection were: a demographic shift – there would be a growth in the number of people 65 and older; and inflation and the average wage.
In a nutshell, the population is ageing and we have to figure out a way for people to retire with enough time and dignity left in their lives to enjoy it.
The arguments to keep retirement age at 65 are valid.
Some people can’t keep going until 67 – raising the age could penalise people in physically demanding jobs while favouring those in other professions who can comfortably work into their late 60s.
Life expectancies are not always equal.
Māori, Pasifika, lower-income New Zealanders and people in poorer health have shorter life expectancies overall.
A higher retirement age means some people would receive fewer years of New Zealand Superannuation, and some may die before receiving much of it at all.
Raising the age means the current working population must work longer, however, we must not pretend that nothing needs to change.
New Zealand is not quite an outlier – many countries set their retirement age at 65 or lower. But some of those we often look to for comparison have made a move. Australia’s is 67 and the UK’s will be 67 by 2028.
The next Government needs to have this conversation with the working public.
Should the retirement age increase?
Should wealthy retirees receive the same support as everyone else?
Should there be exemptions for physical occupations?
Should KiwiSaver play a bigger role?
Raising the retirement age may not be fair for everyone, but pretending the current system faces no long-term pressures is even less honest.