The government has proposed raising the superannuation age from 65 to 67 from 2037.
Prime Minister Bill English and Finance Minister Steven Joyce announced the changes in Wellington on Monday afternoon.
The age will be raised by six months each year from 1 July 2037. The government also announced an increase in the residency requirement from 10 years to 20 years. The requirement will change when legislation is passed, English said.
Legislation will be introduced in 2018 - after this year's general election - to initiate the change, English and Joyce said. This will allow for the issue to be discussed in the lead up to the 23 September election and allow for other parties to give their stances on the issue, English said.
He added that he thought introducing legislation during the current parliamentary term would not work.
English said he supported the government's previous stance that the age would not be raised while former Prime Minister John Key was in the role. That promise - since 2008 - had created certainty for people during the financial crisis and was the right stance at the time, he said.
National Party MPs discussed the proposal in early February at an all-day caucus meeting, English said. He had always planned on making the announcement today after a cabinet discussion, he added.
English would not be drawn on whether National could change its stance on the policy if required to form a government after the election.
Current government support partner United Future does not support the move. Potential Kingmaker Winston Peters (NZ First), also attacked the move.
“The only safeguard that the superannuitants of this country have uniquely remains New Zealand First," he said.
English said he hoped other parties would come around to the proposal in time. Labour, in particular, needs to explain why the party used to support raising the age, but had shifted its stance under current leader Andrew Little, he said.
The policy should save about $4bn per year, or 0.6% of GDP, once fully in place, English and Joyce said.
Meanwhile, English said the government was not looking at other changes to the savings environment, such as tweaks to KiwiSaver. He reiterated that the government was planning on resuming contributions to the NZ Super Fund once its net debt to GDP had fallen below 20%.
Here's English's statement.
NZ Superannuation age to lift to 67 in 2040
The Government will progressively lift the age of eligibility for NZ Superannuation from 65 to 67, starting in 20 years’ time, Prime Minister Bill English announced today.
“New Zealanders are healthier and living longer so adjusting the long-term settings of NZ Super while there is time for people to adapt is the right thing to do,” Mr English says.
The changes will be phased in from 1 July 2037 and will not affect anyone born on or before 30 June 1972.
Even after the change, someone who retires at age 67 in 2040 is likely to receive NZ Super for longer than someone who retires at age 65 today. That is because average life expectancy is increasing by about 1.3 years each decade.
The change will be legislated for next year.
“This Government has a strong track record of supporting older New Zealanders. Since 2008 weekly payments to superannuitants have increased by 35 per cent after tax while inflation has increased by 14 per cent.
“Gradually increasing the retirement age from 2037 will more fairly spread the costs and benefits of NZ Super between generations, ensure the scheme remains affordable into the future and give people time to adjust,” Mr English says.
“It will also bring New Zealand into line with other countries like Australia, the United Kingdom, Denmark, Germany and the United States which are all moving to a retirement age of 67.”
There will be no change to the universality or indexation of NZ Super.
Mr English says the Government is announcing the change now so that political parties can debate superannuation transparently in the lead-up to the election.
And here's one from Joyce.
Lifting NZ Super age the right thing to do
Progressively lifting the age of entitlement to New Zealand Superannuation from 65 to 67 is the responsible and fair thing to do for New Zealand, Finance Minister Steven Joyce says.
"Average life expectancy is increasing by around 1.3 years each decade and more older people are staying in the workforce,” Mr Joyce says.
“Greater life expectancy is of course positive but it does drive up the cost of NZ Super. While New Zealand has a more affordable scheme than most countries, the increasing costs would require future trade-offs – either restricting spending increases in areas like health and education, or increasing taxes.”
The Government intends to increase the age of entitlement for NZ Super by six months each year from July 2037 until it reaches 67 in July 2040. This means everyone born on or after 1 January 1974 will be eligible for NZ Super from age 67.
Other settings such as indexing NZ Super to the average wage and universal entitlement without means testing will remain unchanged; and the age that KiwiSaver funds can be accessed will remain at 65.
“Making a change over a reasonable timeframe will give future generations of New Zealanders more choice as to how they allocate their government spending,” Mr Joyce says.
"While others have called for an earlier transition, the Government's view is that giving 20 years’ notice balances timeliness with being fair to current generations of working New Zealanders.”
Average life expectancy in New Zealand has increased by 12 years over the past 60 years, including by four years since 2001, when the age for NZ Super was increased to 65.
“When the age was set at 65 in 2001, a retiree could expect to spend about a fifth of their life receiving NZ Super. That has since increased to around a quarter,” Mr Joyce says. “Following this change, those eligible for NZ Super at 67 in 2040 can still expect to receive it for a quarter of their life on average.”
Mr Joyce says the Government’s previous position of not changing the age of eligibility was appropriate in the aftermath of the Global Financial Crisis, when New Zealanders were looking for certainty at a time when the Government’s finances were under pressure.
The Government is also proposing to double the residency requirements for NZ Super so that applicants must have lived in New Zealand for 20 years, with five of those after the age of 50. People who are already citizens or residents will remain eligible under the existing rules.
The Government intends to introduce legislation to make these changes early in 2018. The residency changes will cover people who arrive in New Zealand after the legislation is passed.
"These changes are important and need to be politically durable,” Mr Joyce says. "Scheduling the legislation in this way gives all political parties the opportunity to discuss their position with the public before it comes before Parliament."
The proposed changes to the age of eligibility and the residency requirements are estimated to save the Government in excess of 0.6 per cent of GDP or $4.0 billion annually once the changes are fully in place.
Included in the legislation will be provision for parliamentary consideration of any need for any temporary transition requirements in 2030.
"It is not possible yet to determine what, if any, temporary support will be needed for people who are unable to continue working beyond the age of 65,” Mr Joyce says.
“Considering any requirements in 2030 will give a future parliament the opportunity to consider current information on health and labour market trends of different groups as the age change approaches."