December 8, 2010 7:37am by David Farrar

The super age

The retirement eligibility age should be increased from 65 to 67 by 2033, a review recommended yesterday – but Prime Minister John Key said there would be no change on his watch.

Retirement Commissioner Diana Crossan believes the age should start to increase from 2020 by two months a year until 2033, when it would reach 67.

I agree entirely. One could also do it starting in 2024 and increasing by three months a year.

Mrs Crossan also proposed changing the formula used to calculate the annual increase in superannuation.

It is now set as a percentage of the average annual wage.

But Mrs Crossan said that from 2020, the rate adjustment should be based on the mid-point between the increase in the consumer price index and the average weekly earnings.

She said the changes were essential to preserve New Zealand Superannuation for the next generation.

The Commissioner is very brave, and correct, in recommending this. National Super is unaffordable in the long-term indexed to the average wage.

All other benefits are CPI adjusted only.

The compromise of having the increase be halfway between the CPI increase and the average wage increase is excellent. It means that in real terms national super will still grow pretty much every year, but that it will become more sustainable.

NZ has the most generous public superannuation scheme in the world. Those currently retired and soon to retire should continue to get it. But those retiring after 2025 (my preferred date) should be on a new scheme along the lines outlined by the Commissioner.