Working longer, lifting retirement age touted by OECD as means to preserve pensions for longer living aging population. Your view?

Working longer, lifting retirement age touted by OECD as means to preserve pensions for longer living aging population. Your view?

By Amanda Morrall

An Organisation for Economic Cooperation and Development (OECD) report on public pension schemes suggests cash-strapped governments worldwide will be forced to raise the age of retirement, and potentially narrow eligibility to those who need it most, raising questions about what New Zealand will do to solve its own brewing crisis.

In the last few decades life expectancy has seen a near-continuous increase, signaling for governments with social safety nets a serious problem about how to sustain them in the face of a rapidly greying population.

The OECD, in its Pensions at a Glance 2011 report,  forecasts a necessary and growing role for private pensions to compensate for 'reductions in public benefits that are already in the pipeline or are likely to be required.'' It further underscores the need to encourage and accommodate older workers as part of a global solution.

"The public sector role's in providing incomes in old age will remain very important but will diminish. Working longer and private pensions will inevitably have to fill the gap.''

New Zealand with an older than average workforce, and one of the lowest poverty rates worldwide among the elderly was heralded as a success. The adoption of KiwiSaver, and its robust uptake of 1.6 million accounts in under four years, also received favourable mention in the report. (For more on New Zealand's public pension system see this report by Treasury).

Retirement Commissioner Diana Crossan welcomed the OECD paper and said it was a valuable resource for governments grappling with pension challenges. But she said it also reinforced the urgent need for New Zealand to address it's own ticking time bomb.

'Flogging a dead horse'

Crossan said successive governments have failed to tackle the issue but the time has come where the problem could no longer afford to be ignored.

The Retirement Commission, in its three-yearly Retirement Income Policy Review, recommended a gradual lifting of the age of retirement to the age of 67 starting in 2020.  It also outlined a formula to change the way the New Zealand Superannuation annual rate of adjustment is calculated as another means of stretching the public purse.

While Government is expected to report back on those recommendations at the end of March, Crossan was doubtful any decisive action would be taken based on the history of the political treatment of retirement age proposals.

"My real worry is that the Government is just going to say no and then something is going to have to give in the future.''

Asked whether the matter deserved to be made an election issue, Crossan said history had shown that politicians wouldn't touch it.

"It's no use flogging a dead horse. The question the press should be asking of Government is if you're not going to use our formula what are you going to use? Because they have many more levers than I do. 

"They could say we're going to stop building prisons, and we'll find the money that way, or we're going to cut back on roads, or grow the economy but something has got to give.''

Michael Littlewood, co-director of the Retirement Policy and Research Center, said public debate was desperately needed as the longer the issue was delayed the more problematic it would become.

"The issue for New Zealand is can the Government, a.k.a. taxpayers afford to pay the pension in its current form? That's the issue we need to be debating and which the Government steadfastly refuses to discuss.''

As a percentage of GDP, New Zealand Superannuation costs are expected to double by 2050, from its present 4% to 8%.

While Littlewood rejected the idea of means testing the pension as a way to preserve it, he said lifting the age of retirement from 65 to 67 was the "most obvious choice" New Zealand could make. (For more on the effect of New Zealand Superannuation eligibility age on the labour force participation of older people see this report on the Treasury's website.)

"When you think that age 65 was set in 1898 as the state pension age, it is policy madness to ignore the changes that have happened over the last 113 years.''

"Also the fact that New Zealanders are voting with their feet by working after age 65 indicates that it's not an adverse social change.''

The OECD, in its report, notes that several countries worldwide have dismantled previous incentives to retire early. It suggests governments need to do more to support older employees in the workforce through training opportunities, and work conditions.

Recommendations from the Retirement Commission's Retirement Income Policy Review.

Recommendation 6.1
That, with effect from 2020, NZS rates should be adjusted each year by the average of the
percentage change in consumer prices and earnings, subject to no less than price inflation
in any year.
Recommendation 6.2
That a future rise in the age of eligibility for NZS should be announced. The age would be
gradually increased from 65 years starting in 2020 and would rise by two months per year
until it reached 67 years in 2033.
Recommendation 6.3
That as the age of eligibility for NZS is increased above 65 years, a transitional, means-tested
benefit should be introduced to address the particular situation of people who are aged 65
and at risk of hardship because of their inability to continue to financially support themselves
over an extended period.hange that should be taken. The fact that NZ are voting with their feet by working after 65 indicates that an adverse social change.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Slightly different view: Older people are an asset, not a drain


Means testing for retirement benefits will penalise those responsible citizens that have had the foresight to save for retirement unless the the income limit before it kicks in is quite high.

Thanks STP.  It is nice to see some real reserach for a change.

Sounds fair enough if you're just dicking around in an office all day I suppose but there must be an option for those not physically able to compete with the younger workers because of age related deteriation. Can you realisically expect to be hired as a 67 year old builder for example.

Or a shearer, fisherman, fireman, watchmaker, labourer, fencer, construction worker, forester etc. 

The idea is that by changing the rules a future govt will be able to balance the a surplus....act in a prudent and diligent manner...not waste taxpayer money on stupid vote buying scams.....anyone out there think a future nz govt is up to the, I bloody thought not.

Nice. By the way it's ageing rather than aging (unless you are American).

I'd rather see an incentive to get older people out of the workforce earlier - so that we promote our younger generations to become the decision-makers sooner.  One way to make this affordable is to means test the pension.  In other words, say you lower the age of super to 62 - but those over that age that choose to carry on working - simply don't get it.

Additionally, those choosing to retire early will likely volunteer their labour in community positive ways - increasing our social capital.

We have to focus policy on improving opportunities in the country for youth to thrive.  There's going to be alot of int'l competition for them in decades to come.


NZ has to look at how can the country supply state housing an welfare for everyone.

The costs are huge for this group,its not fair on people who are working an have to pay for everything.

Working people can not save enough for there retirement because they are paying for everything an the wages are low,an taxes are high to support the unemployable.

Time limits on support,the country needs trained people.

It makes sense to keep people busy learning new skills.

If there was a war tomorrow nobody would turn because half the country would be still in bed a sleep.

Its time to rattle some cages an make some changes.

My brother has a small business with about 15 staff,the only people who turn up for work every day are the asians.They work really hard an are happy busy people which makes my brothers life a lot easier.He has tried employing locals who can think off every excuse not to work hard or turn up.This is the problem for all business owners in NZ,we have to many unemployable people.

Business people need good workers not lazy dead beats,this country has to stop breeding P addicts.No country can survive going down this path.

Time to fix this now.

The Sir Humphreys in wgtn are ever hopeful that a moronic govt will introduce 'means testing' for one simple will mean more 'work' for them...another dept within the IRD to fathom out who is entitled to what...and the total cost of the extra staff, a building, the computers and perks and the millions to go to recently retired IRD bosses hired on contract to give 'advice'....will be a bloody sight more than the millions stolen from those who saved and didn't splurge away all their income during their working lives.

Thinks that's all.....then you are a soon as 'means testing' madness enters the tiny brain of a polly likely to be in or influence govt, you can expect those who would be on the receiving end of the theft policy, to change their investments to avoid the means testing.

You can also expect the yet to retire mob, to make an effort not to have pots of savings when they hit 65 or whatever the age is to be. This will negate any theft by govt but the taxpayer will be left funding the new IRD department and all the staff and their bloated salaries etc etc for ever and ever.

If you want to cut down the total cost, do so by encouraging saving....a difficult task when you have Bollard out to discourage it!.....raise the retirement age to 67 from 2021 or whatever and cement in place a reduced payment that keeps going down....that message will sink into the fat between the ears of those below 50 and they will reduce their splurging on shite and start will mean you do not need to fund a whole new dept inside the IRD!

I assume in "shite" you include food, rates, doctors visits, school fees, petrol to get to work, etc.

While there are a lot that waste money there is a good portion who struggle to make ends met. And these a good honest people from what we call struggle street who want the best for their childs (not in a materaillistic way).


I agree with the issue of retirment savings / income needs to be addressed with a long term view but you can't save for your retirement wiht 10 years notice.

Which way do you go on tax for retirement savings : EET or TTE? These decisions have an influence on the behavoiurs of savers.

PS why do you keep banging on about the millions stolen from savers???

You are raising a strawman Wolly, nobody in the article says they support means testing and nobody in Government - politician or bureaucrat - has said they want to introduce it either.  If you have some evidence to back up your allegations about what "the Sir Humphreys in Wellington" really think, by all means share it with us.

You can't look at super levels in isolation to all the other demands on the public purse and tax levels and past "agreeents" on how particualr public spending will be funded (e.g. for super pay general income taxes now, get super later).

Super as it is now is affordable in the future if other things aren't paid for or aren't provided as much as at present or if personal and corporate taxes are at different settings (could we really afford the recent tax cuts?) or if the tax system is changed or ????

Therefore the article and the retirement commission analysis is simplistic in ths narrow look at one part of a much much bigger picture.





That's a bit unfair on the Retirement Commissioner, who is quoted in the article precisely as saying that if the Government doesn't reduce the costs of NZS by reducing the amount payable and the age at which it becomes payable, then it will have to find other ways of funding the cost, eg by cutting back on other spending. 

The problem here is that any change to pension arrangements ought to be introduced well in advance so that people have time to adjust their personal savings plans, which means that there are few people among the voting population who actually benefit as a result. The benefits of lower spending on pensions go to people who will have a tax burden in twenty years' time lower than it would otherwise be, or who will be able to afford public spending (on other things) higher than it would otherwise be - in other words, people who aren't voting and may not even be born yet.  

 Therefore there is no incentive for a politician to do anything about it - far easier to leave it to the next Government, or the one after that 

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