Retirement Commission lashes out at Government for not addressing impending funding crunch with New Zealand Superannuation

Retirement Commission lashes out at Government for not addressing impending funding crunch with New Zealand Superannuation

Diana Cross says politicians have their heads in the sand over the NZ Superannuation eligibility age of 65.

By Amanda Morrall

Retirement Commissioner Diana Crossan accused politicians of having their "heads in the sand" when it comes to financing New Zealander's retirement following a decision to keep the age of retirement at 65.

After months of waiting for a response on recommendations from the Commission on how to extend the shelf-life of New Zealand Superannuation given impending challenges created by a crush of Baby Boomers set to retire, Crossan said she was sorely dissapointed by their response to retain the status quo.

“The Government has said the status quo should remain, but something needs to change to keep New Zealand Super affordable in the long term. Politicians appear to have their heads in the sand about the issue of the raising the age of eligibility.''

“If the Government doesn’t think raising the age of eligibility is the solution, I’m interested to hear what their alternative solution is,” Crossan said.

"Let the people decide"

Prime Minister John Key said he did not think he had his head in the sand.

"The Retirement Commissioner is proposing that the age of entitlement is raised from 2020 through to 2033. Bluntly, I've got a lot of things to consider between here and 2020, not the least of them being some of the strong economic issues that we're dealing with," Key said.

"My view is that we don't need to raise the age of retirement. I've given a very strong commitment to the public of New Zealand, let them decide what they think is best," he said.

The Retirement Commission, in its three-yearly Retirement Income Policy Review had recommended the age of eligibility be gradually raised from 65 to 67 starting in 2020 with the end point of 67 being reached in 2033.

It also suggested that NZS rates be adjusted each year by the average of the percetnage change in consumer prices and earnings, subject to no less than price inflation in any year.

As a protection against elderly who may be at risk of hardship having to wait till 67 for support, the commission proposed a transitional means-tested benefit to alleviate financial difficulties.

The Government, which originally pledged a response end of March, rejected all three key recommendations.

Crossan said Government's failure to deal now with the looming problem of too many people drawing down on too little funds was putting at risks the retirement futures of today's 45-year olds and younger Kiwis.

"Why wait until we have to raise the age suddenly in 10 years time? We can't keep ignoring this issue.''

NZ Super a "giant Ponzi" scheme

ACT New Zealand finance spokesman Roger Douglas called on the government to heed Crossan's advice, equating New Zealand Super to a giant "Ponzi scheme."


"New Zealand super is, in reality, a giant Ponzi scheme requiring ever increasing numbers at the bottom to pay for those at the top.  Demographics show a decreasing number of workers to every superannuitant from 4.5 workers today to 2.2 workers by 2036.''

Douglas said longer life expectancy (a 40% increase since the time NZ Super was introduced) meant urgent changes were necessary.

“We need to radically rethink New Zealand Super so that future generations do not face ever-increasing taxes to fund an unsustainable scheme.  The best way to do that is to remove politicians from the equation, allowing individuals to make their own provisions for their retirement.

Although Key has suggested there are more pressing issues to attend to (and that he would let the public decide on the issue) Douglas accused Key of being out of touch with Kiwis.

"Most New Zealanders realise that an age increase is inevitable."

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

“If the Government doesn’t think raising the age of eligibility is the solution, I’m interested to hear what their alternative solution is,” Crossan said.

Labour Party leader Phil Goff didn't offer any solutions.

Goff said raising the retirement age from 65 to 67 was not part of its consideration, while it readies itself for the release of an economic package on Thursday.

Labour has talked previously about resuming contributions to the Cullen Fund, while broadening the tax base to find the revenue that could meet the costs of superannuation.

NZ out of step with other OECD countries

Crossan said the Review is based on thorough research, and the recommendation to raise the age of eligibility is comparable with changes made by governments in most developed countries, including the United States, United Kingdom and Australia.

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.

An Organisation for Economic Cooperation and Development (OECD) report released earlier this year on public pension schemes suggested cash-strapped governments worldwide would be forced to raise the age of retirement, and potentially narrow eligibility to those who need it most. See Amanda Morrall article on OECD report here.

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.''

While Government has signalled policy shifts to encourage more New Zealanders working past the age of retirement (see the Ministry of Social Development report here)  it has continually ruled out a change in retirement age, as have previous governments worried about the repercussion with the voting public.(For more see Alex Tarrant article here).

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.

Government has suggested the extra tax revenues generated from Kiwis working past age 65 will help offset pressures on the New Zealand Superannuation.

New Zealanders' earnings from paid employment are 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.

(Updates with reaction from Prime Minister John Key and Labour Party leader Phil Goff).


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Great piece and very timely.

Yes the Govt DO have their head in the sand - for political gain at the expense of the country's future

 When this is John Key, please Amanda give me a ring. I just bought a brandnew carpet- beater.

There's no need to worry. Goofy's CGT will pay for it.

..thanks David. I paid $ 22.50 for it - top Chinese willow tree handcraft quality manufactured by an African Chinese slave in Uganda for $ 1.05 in front of a Chinese dairy farm with NZcows - imported to China and then exported to Uganda with mother milk delivery for rich Americans and Russians living in Singapore doing electronics for Fonterra in NZ delivering it to China.

We are so globalised stupid.

How many more carpet- beaters do we need David ? I'm sure good enough for a 50% discount.

Perhaps he's first got to practice up on pronouncing it? 



Too hard to tell Amanda from this picture. If only we had a glimpse of which tie is being worn, we could cross reference to JK's wardrobe of many....

Crossan is a joke, saying start raising the age from 65 to 67 starting 2020 until 2033.

No wonder JK is ignoring her, might as well do nothing as do that.

Basically govt should give people 6 (2 terms) years warning, and then increase by a year every 2 years thereafter - 2017= raise to 66; 2019= raise to 67; 2021= raise to 68.

Crossan won't recommend anything worthwhile like that, alas 

Why would John Key even care? He's rich. When he leaves politics, he will take some ultrajuicy directorships and board-of-directorships, where he will phone in an appearance once per year and get paid megabucks for it.

So why would he lose any sleep about anyone else? Newsflash: he won't.

He is rich and that allows him not to worry about grabbing more and more as is the case for many / most politicians. I wish there were more successful people in the Governement instead of petty little people with petty little goals of self-enrichment only...

Agree with the last part , but I would love to see what his "wealth"'is & how much it has grown since he got into politics , compared to before he did. Only then might I consider he gives a toss. Reality is most likely the only story they could sell was , he a rich so cant be corrupted, which is of course total BS.

This is what I don't understand. What's he in politics for?

He had the opportunity to make a difference. He had sufficient political capital to explain the facts of life to the great unwashed and to implement medium to long term policies that would get us back on track.

Now he'll go down in history as just another failed pollitician.

Just shows that you don't have to be smart to make a lot of money. You don't even have to understand Fourth Form bookkeeping.

The system is totally screwed.

Bugger off to Australia while you can. There're plenty of immigrants to buy your house. They need to stay here long enough to become citizens before they follow you.

AH & Carpet. You need to read the history a long way back to understand money systems, where they came from , who has the wealth to start them up & did they have the strategy to strangle the planet. Without understanding the basics of it all , then you won't believe the rise of JK from mid level career currency manipulator to PM of a whole country, almost as if by magic.
He was never going to be what people hoped he would because he can't. The system is not designed that way, I'm deadly serious.
When you say , he turned out to be , " just another politician" think about what that might really mean , & maybe with an open mind you can understand just how accurate that statement is & why.
To those who refer to Oz , they are really having some very nasty stuff going on there & I don't mean the ETF debate, it's part of it but is much much worse. Ill try find links.
So don't head here , stay in Nz & man up for our country hey.

Sir John - and he's made sure he'll get the title given one of his first actions as PM was to write to the Queen requesting the restoration of titular titles in NZ. 

Check him out in this Hardtalk interview - end of the segment - he's like a child in a candy store when he talks about his how proud he is to have done that [for New Zealand.... yeah, right!]; 



So why did he want to be PM? Too much being bullied at school is my guess...

Well, he wanted to be Prime Minister for a long time. He told his future wife that when he met her.

So basically he had a goal, and worked to get there.

Now I don't want to sound controversial, but SURELY THAT IS A GOOD THING!

Other's are commenting that "he's rich", as if that's a bad thing!! We need more people wanting to be rich, wanting to make money, and wanting to make this country a better place.

Much better than the scumbags who take from the busy and give to the lazy in exchange for votes. Seriously, look at people like Darren Hughes - a career politician, he's done nothing get drunk with naked teenage boys.

There’s plenty of spending cuts that are on order before the NZS is tinkered with: e.g., the “non-working families” handouts, the “too lazy to be in employment” benefits, the various ethnic handouts, the useless studies grants, the unnecessary policy advisors, the bloated public sector “jobs”, etc., etc.

That's true.

On the other hand retirement's not all it's cracked up to be either

I'm 70 and I'm totally over it.

Plenty like me.

Personally I think if you are on good enough health and the work is mentally enjoyable there is no reason why you have to retire. I know a few ppl who have worked to 70~73....I reckon its helped to keep them well....Certainly for myself I hope to be working part time like 2 or 3 days a week at 70, indeed financially I expect it will be essential...



"My view is that we don't need to raise the age of retirement. I've given a very strong commitment to the public of New Zealand, let them decide what they think is best," he said.

Go Mr Key - leadership by focus group again!!! In that case can you please lower the retirement age to 40.

ha ha priceless

to be fair, at least he seeks a mandate. But I generally agree that it would be nice if he could actually show some decisive leadership on an issue for a change  

He's steering us quite decisively toward the interests of Wall Street.

Yes he is doing what he was brought in to do. Follow on from Helen in the ruin your country steeplechase.
Might have to dust off my copy of the opal files in case people need a history lesson on how to infiltrate a country using politicians & corporate sellouts

"This is what I don't understand. What's he in politics for?"

John Key is in politics to feed his power urge. He doesn't need the money. He's compensating for something only he and his analyst know about.

The reason he SHOULD be in power is to function as CEO of NZ Inc, managing the short term and planning for sustainability.

Ignoring demographics in a society like New Zealand's is like Kodak ignoring the emergence of digital photography.  

What are you on about?  New Zealand Superannuation isn't paid out of investment premiums.  It's paid out of contemporary taxation. 

If you're thinking about KiwiSaver, there is no proposal to raise the age at which you can access your savings.

Kiwisaver withdrawl age and NZSuper age are the same thing, so this is part of the same debate.

"..people become eligible to get their money when they qualify for NZ Super (currently 65)."

Yes, the ages of eligibility for NZS and for withdrawal of KiwiSaver savings are the same at the moment. 

But there is no reason why they should necessarily remain so.  I have not seen it explicitly stated anywhere that the Retirement Commission is recommending raising the KS access age as well as the NZS eligibility age, and there would be no logic in that.  It's NZS that is the future public affordability problem.

References to "retirement age" are not particularly helpful or accurate.  There is no "retirement age" in NZ, in the sense of an age beyond which you are not allowed to work.




Still don't understand what you are on about, sorry.

Yes, the Government might change the rules again as regards KiwiSaver. Yes, some investment funds have performed badly. Yes, Richie McCaw was a bit of a disappointment at the weekend. Yes, there is something very rum about the recent wedding of Prince Albert of Monaco. 

But none of that is what this discussion is about.  This discussion is about whether the Government should accept the recommendation of the Retirement Commissioner, to reduce the future costs of New Zealand Superannuation by raising the age at which people become eligible to collect it. The Retirement Commissioner has not recommended raising the age at which people can access their KiwiSaver savings or that people should be forced to put their money into investment schemes.  

Sorry...did someone explain what Diana Crossan actually does....and how much she receives for that "work" it a department we could not do without!...what would we save by closing it down?

Wolly, to be fair, Diana is an internationally respected advocate for financial literacy. I know you'll have a go at that "cause" as well but the education system doesn't emphasise money smarts and neither do many parents...Someone has to push for this survival skill as well as get the message out about self-funding one's retirement in the absence of crumbling social securities. John Key clearly doesn't care as he can't even be bothered to offer any meaningful comment on the subject. Pass me the carpet beater Kunst. I'll have a go.

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