By Amanda Morrall
No one likes to think about retirement, least of all Prime Minister John Key.
Anytime he is questioned about what the government is going to do with the ticking time bomb of too many retirees, living longer than ever, putting exponential pressure on the health care system and NZ Super, he dismisses the issue with a polite smile and wave, and tells us he's got more pressing matters on his mind.
In part, I can understand why he is not worried. Because when the bomb explodes, he'll be a footnote in political history and enjoying a pretty cruisy life in retirement -- probably at his luxury "batch" in Maui so he can avoid the angry cane waving mob at his doorstep.
Also, let's face it retirement is grim because it's one step closer to death. You get old, you get sick (unless you're genetically blessed) and you become a social pariah because you invariably start to sound like a broken record. Of course, that's not everyone's fate in old age, and some old folks are lovely to be around, but generally that's kind of the pattern.
Okay, so it's not a sexy subject but we're all headed there. It's just not all of us, (re most of us) won't be enjoying high tea at the Waldorf Astoria or watching the sunset from condos in Maui.
How about a pension at 80?
Just last week, the Canadian government in its latest budget bumped up the age of retirement for the Old Age Security (their version of NZ Super) to 67. It won't happen overnight, it'll be phased in slowly, clicking into place in 2020 or thereabouts depending.
In the United States, their pension age is also shifting to 67. It's the same in Australia and also the United Kingdom, which is taking it ever further progressively sliding it to 68. They're even talking about setting the age of retirement to longevity which would mean that a child born this year, wouldn't be eligible for a state pension till 80.
What are we doing in New Zealand? Diddly squat.
For years, the Retirement Commission has been waving red flags and yet our personally well-provisioned PM - who has even said he'd rather resign than raise the pension eligibility age from 65 - continues to kick the proverbial can down the road hoping for the issue to die and for Diana Crossan and her report wielding posse to stop pestering him.
In the face of alarming projections showing the cost of the New Zealand Super to be frightfully unsustainable due to ballooning demand and not enough working age taxpayers, Crossan has proposed the age of retirement gradually be raised to 67 as well. (See the RC's full recommendations here).
Effectively, it would mean that something who is 45 years old today, wouldn't retire till 67. The move, according to the Retirement Commission, would lower the projected cost of New Zealand Super from about 7.3 per cent of gross domestic product to 5.3 per cent in 2035. Currently, around 4.2 per cent of GDP goes on NZ Super.
Crossan also proposed a few other adjustments to make NZ Super viable for future generations but they've also been dismissed.
Why? Crossan can't get any straight answers from Government.
So what does it mean?
What does this mean for you and I?
What it signals for me, and I'm 41, is that NZ Super, in its current form, is toast. It's bound to be less than it is now (which is around $14,000 each for a married couple and $17,000 an individual sharing accommodation) or it'll be late coming, 67, 68 or possibly 70.
According to Treasury projections, the number of recipients of NZ Super will skyrocket from 500,000 in 2010 to 1.3 million by 2050. Over that same period, the number of 85 year olds will see a five-fold increase.
That means I'll have to pull up my savings sock up, and fast.
I'm in KiwiSaver and contributing 4% but that's not going to get me there to enjoy the kind of lifestyle I fancy in retirement, which isn't really all that fancy but I do like travelling and getting my hair professionally cut.
I fully expect to be working past age 65 and thankfully I don't dig ditches for a living as I can't imagine doing that at 70. My biggest risk as a writer might be my fingers curling up from genetically inherited arthritis so I could be tapping out columns with my toes or nose.
It also means that I will need to stay in good nick because the health care system, in current form, won't be nearly as generous. That too is unsustainable. Expect a Ford, not a Cadillac when it comes to medical services.
According to a recent C.D. Howe report out of Canada, annual health-care costs for a person over 65 are three to four times greater than for someone under 44. For a person over 85, they’re 12 times greater. By the 2020s, it is expected that nearly 17 per cent of Canada’s GDP will be spent on health care – up from 12 per cent today. I expect New Zealand will be similar.
Way more old folks than kids
Fast forward to 2015, and there will be 60 per cent more elderly folk (over 65 years of age) than there are children. That's by Treasury's own calculations I should add.
Mercer New Zealand, which has authored several reports on the looming retirement crisis, suggests an effective retirement savings scheme will have three parts to it: a government funded pension (altered from its current form), savings via the workplace (KiwiSaver or another scheme) and personal savings.
Mercer also believes working past 65 will be a matter of fact not choice.
What that also says to me is that you should be in a line of work that you enjoy, because life's going to be too long to hate what you're doing.
Don't worry about me John Key, I've got a plan B. What's yours?
*Fixes NZS rates for individuals and couples.