Student debt generation to face higher pension age - Labour

Opposition and government support partners have rounded on the National Party's policy to raise the retirement age to 67, saying that delaying the move for 20 years adds a further burden to the generation that had to borrow for tertiary studies.

Anyone born after June 30, 1972, will face a phased increase in the age of entitlement for the universal state pension under proposals that National says it will not put into law until next year, meaning it plans to fight the September 23 general election on the issue.

Labour Party leader Andrew Little says the proposal will disadvantage a generation that had already faced higher costs than the generation of retirees who will not be affected by the change.

"1972, if that's the cut-off date now, this is the generation who've had to pay for their education. They're missing out on housing because of this government's housing policy and they're waiting two years longer to get superannuation," Mr Little says. He questioned whether the savings from the move justified it.

"If affordability is the issue, if the difference is 0.6% GDP (gross domestic product), that is a barely negligible saving, so clearly affordability isn't the issue."

Prime Minister Bill English says the 0.6% annual saving represented about $4 billion a year and is necessary if the government is to keep being able to fund health, education and other public services without having to raise taxes.

The biggest impact the government could make on the affordability of the state pension would be to restart payments to the New Zealand Superannuation Fund, which were stopped in response to the 2008 global financial crisis and are not scheduled to restart until net government debt falls to 20% of GDP, forecast for early next decade.

The Act party leader, David Seymour, labelled the decision "inter-generational theft."

"The prime minister is protecting baby boomers, while pulling the rug out from under young people," Mr Seymour says.

New Zealand First leader Winston Peters did not explicitly reject the policy in his first statement on the issue, saying instead that it was "an effort to look responsible by the prime minister whilst not actually doing anything."

Mr English says the timing makes sense: giving voters an opportunity to vote on the proposal rather than the usual pre-election dynamic, where no party can propose a change that he says all New Zealanders are aware was necessary if the universal state pension is to remain affordable in the future.

"This is just the right thing for New Zealand. The politics can get stuck in cycles where, before every election, every party has to promise that nothing will change and after the election they can't change anything because they promised they wouldn't," he says.

The Retirement Commissioner, Diane Maxwell, had recommended the change occur more quickly because of forecasts of Budget blow-outs in the future caused by a combination mainly of health, pension and debt servicing spending.

Mr English says he had begun work on the policy immediately on becoming prime minister in early December after the resignation of his predecessor, John Key, who had promised to resign if the pension age of eligibility were touched on his watch.

Mr Little says Labour will not raise the pension age if it becomes the government, arguing that people who undertake hard physical labour still deserved to be able to retire at that age.

Life expectancy might be rising, but bodies still wore out at about the same rate, Mr Little says.

Mr English and Finance Minister Steven Joyce published forecasts of life expectancy suggesting that people receiving the pension from the age of 67 will still get the entitlement for about the same average length of time after 2037 as today's 65 year-olds.

The policy will maintain a universal pension, with no means-testing.

However, the system for migrants receiving superannuation will become less generous - a move broadly supported by both Messrs Little and Peters.

From early next year, new applicants for New Zealand Superannuation will need to have lived in the country for 20 rather than the 10-year minimum, five of them while over the age of 50. Existing migrant pension recipients will be unaffected.

(BusinessDesk)