New Zealand must wake up to the fact that our aging population means NZ Superannuation will become increasingly unaffordable. The number of people over the age of 65 will double in the next thirty years and the net annual cost of NZ Superannuation will triple over the next twenty years from $11 billion to $36 billion. The Commission for Financial Capability has recently released the recommendations from its 2016 review of retirement income policies. Retirement Commissioner Diane Maxwell is now calling for the age of eligibility for NZ Superannuation to be increased to 67 by 2034, and for the age of access to KiwiSaver funds to be decoupled from NZ Superannuation.
New Zealand is lagging behind other countries in making changes to retirement age. Australia, the UK, and many European countries have taken steps to improve the financial sustainability of their pension schemes, most commonly by raising the retirement age. John Key refused to discuss the possibility of making changes while he was in office. That obstacle is no longer there and we need to start the debate.
The Commission is also recommending a number of changes to KiwiSaver, to make this a more effective vehicle for retirement saving. These include increasing the minimum contribution from 3% to 4%, allowing people to make contributions at a higher percentage than currently, and allowing people over the age of 65 to join.
To help fund NZ Superannuation, the Commission recommends that Government resume contributions to the NZ Superannuation Fund. Presently, new migrants are eligible for NZ Superannuation after 10 years, and the Commission recommends increasing this to 25 years. As well, the Commission recommends removing the option for non-qualifying partners of superannuitants to also receive a pension.
The bottom line is we all need to take more responsibility for our own retirement.