The government needs to raise the age of entitlement for superannuation from 65 to 67 at least if it is to avoid a major fiscal crisis, says Retirement Commissioner Diana Crossan.
In a move likely to trigger a major political row, Ms Crossan says the gov
The government needs to raise the age of entitlement for superannuation from 65 to 67 at least if it is to avoid a major fiscal crisis, says Retirement Commissioner Diana Crossan.
In a move likely to trigger a major political row, Ms Crossan says the government should gradually lift the age of entitlement by two-month increments from 2020, so as to reach 67 by 2033.
To help those in need, a transitional means-tested benefit should be introduced for those aged 65 who are unable to financially support themselves, says her Report on Retirement Policy, required by statute every four years.
The report is likely to trigger a row partly because Prime Minister John Key has repeatedly ruled out raising the age of entitlement.
The Maori Party has opposed raising the age – in fact its policy is to lower the age of entitlement for Maori because of lower life expectancy.
Ms Crossan’s last report, in December 2006, raised the same issue and she ran into a venomous stream of political fire from the then-Labour government, with then Finance Minister Michael Cullen condemning the report and then senior Cabinet minister Jim Anderton calling for her to resign.
Most other countries with the pension age set at 65 are gradually raising it: Australia, the United States, the United Kingdom, and most EU countries are in the process of doing.
New Zealand has done this before: in 1991 the then-National government moved to gradually raise the age of entitlement from 60 to 65 over an eight year period, and the change saw the cost of superannuation fall from 7% of GDP to 4%.
The other major recommendation is in how superannuation is calculated. At present it is set as a percentage of the average annual wage. The Jenny Shipley-led government changed from this to adjusting the payments according to changes in the consumer prices index (CPI) as a way of reducing its cost.
However Labour changed this back to matching it to the average wage.
Ms Crossan suggests a compromise measure: from 2020, the adjustment should be the mid-point between the percentage increases in the CPI and in average weekly earnings, she says.
“The real purchasing power of New Zealand Superannuation would still be protected by ensuring that the annual adjustment is never less than the increase in the CPI.” It would, however, help keep the cost under better control.
