By Alex Tarrant
The government is not looking at eligibility criteria for Superannuation payments despite a report suggesting greater numbers of over 65s will stay in paid work as the baby boomer generation hits the age at which they will receive the universal government pension.
Over 65s are projected to make up an increasing proportion of the labour force over the coming 40 years, although there would only be limited opportunities for increases after 2031. The greater proportion of older workers in paid employment would mean tax receipts from the group could offset the future cost of Superannuation, but only until 2031, the report says.
Minister for Senior Citizens John Carter has launched a Ministry of Social Development report looking at the economic benefits an aging population would bring to the economy. The first wave of the 'Baby Boomer' generation - born between 1946 and 1964 - is turning 65 this year, with the number of New Zealanders turning 65 in the year to June 2012 expected to be 18% higher than in the preceding 12-month period.
Between seven and ten per cent of New Zealand's labour force is projected to be aged 65 and over by 2051, up from three to four percent currently, it says in the report. Over that period older New Zealanders' earnings from paid employment is projected to rise from just over NZ$1 billion now to about NZ$10 billion in 2051, in 2006 dollars.
That increase in projected income would mean tax revenues from over 65s in paid work would increase from NZ$200 million now to about NZ$1.8 billion in 2051, it says in the report.
However, it is likely there will be limited opportunities for raising participation rates and tax payments beyond 2031, given the increasing number of people aged 75 or more, it says.
"The current research presented in this report confirms that raising labour force participation rates among older people could contribute to offsetting the future cost of New Zealand Superannuation – but only up to 2031. An important additional finding presented in this report is that demography eventually swamps labour force participation," it says.
In order to offset the projected shortfall of Super costs between now and 2031, the proportion of over 65s in paid employment would have to rise from 16% now to over 26% in 2030, it says in the report.
'Why should we look at Super eligibility?'
Carter said the report was commissioned to look at how the demographics of the working age population were changing, and the economic benefits there might be as greater numbers of over 65s remained in employment.
“It’s not [that] we’re going to keep them working, they are going to keep working, and the whole point of the report is for us to understand that things are changing, that the baby boomers are different from any previous generation," Carter said.
"They’ve been in charge for a long time, they’re going to keep on being in charge for a long time," he said.
They will want to make a contribution to this nation, they will make that choice themselves, and it’s those sorts of things we need to understand - that the dynamics are going to be different, and we need to adapt to them.”
Asked whether government should then be looking at the age of eligibility for Superannuation payments, or whether over 65s in work should be receiving Super, Carter answered government had already ruled that out.
Prime Minister John Key has promised to resign before the pension age was raised by a government he led.
“Why would we need to do that [raise the Super age]? We’ve already made a commitment that that won’t happen. But more importantly they will be contributing to our economy, and the whole activity that they will generate, generates a whole lot of wealth in itself," Carter said.
"As a consequence then, that whole issue is there to be discussed and debated, and that’s the important point [which] is, we need to understand the dynamics are changing," he said.
Asked if a greater number of over 65s were to keep working, whether government should be paying them super," Carter replied:
“That’s part of the commitment that this nation has made to people over 65 - that we will. But the point is, that the contribution they make will enable us to do that."
"But more importantly we need to get the debate off just the narrow discussion around superannuation. It’s been too narrow, there are a whole lot of other things that are happening, from a workplace point of view, from a job opportunity point of view, from a skills shortage point of view, from a contribution point of view that the baby boomers generate," Carter said.
'The issues aren't correlated'
Meanwhile, Key said he did not think the issues raised in the report and the argument around the Super age were correlated.
"One is an entitlement that New Zealand and New Zealanders provide for those aged over 65. [And the other -] It’s a statement of fact that, actually that increasingly, New Zealanders are working longer, Key said.
"One in four New Zealanders aged over 65 are engaged in some form of employment, and I think they make a tremendous contribution, both in terms of the skills that they bring to the economy and the taxes that they pay as a result of their efforts,” he said.
Asked if over 65s who were working should be receiving super payments, Key replied:
“I think they’re different issues. In may view that is, yes, simply because we offer a universal system in terms of superannuation and no one is arguing that should be changed," Key said.