The retirement age

Simon Collins at NZ Herald reports:

The growing numbers of elderly New Zealanders who are working beyond age 65 have cut the net cost of the country’s ageing population.

Statistics NZ said yesterday that the population aged 65-plus had doubled since the early 1980s to 635,200 and was likely to double again by 2040.

But a paper by the University of Auckland’s Retirement Policy and Research Centre, published today, says Treasury estimates of the net costs of superannuation in 2060 have been revised downwards from an estimate made in the year 2000 of 9.7 per cent of national income to just 6.6 per cent in the latest revision this year.

Centre co-director Michael Littlewood said a key factor in the reduced net cost was an increase in national income because of spectacular increases in the numbers of elderly people working well past 65.

This shows there is no immediate crisis, but it is still inevitable that the age of eligibility for NZ superannuation will increase.

Labour’s policy is a modest step in the right direction. It doesn’t in fact really increase the age of eligibility. It merely applies an income or means test for those aged 65 or 66. The logical extension of their policy should be to extend the means test to everyone who is eligible for NZ superannuation. I’d rather we tax people less, and only provide welfare to people who need it – than over-tax people, just to give them some of their own money back later.

The argument against means testing is that the cost of applying a means test would be considerable, and the money saved not great. I wonder if Labour have budgeted for the extra compliance costs of their means test?

In terms of the age, I think a gradual shift to 70 is sensible.

But Mr Littlewood said the revised figures gave the country time to have a “research-led debate” about all aspects of retirement policy – not just raising the qualifying age to 67 as the Labour Party advocates, but also whether super should be linked to wages or prices and whether some of the cost should be clawed back through tax changes from those still on high incomes after 65.

The key measure you could change to make superannuation more affordable would be to link it to inflation, not the average wage.

What I’d like to see is the current scheme locked in place for everyone born before 1965 or even 1960. And then have that research-led debate on what sort of scheme we should have in place for those far off retirement.