Prime Minister Bill English broke with his predecessor last week in a major policy shift, announcing a proposal to raise the age of eligibility for superannuation, New Zealand’s pension scheme, from 65 to 67 years old in the year 2037.
English argues that this measure will cut costs for an ‘unaffordable’ and ‘unsustainable’ superannuation scheme, which currently costs about $11 billion annually. Economist Michael Littlewood of the Retirement Policy and Research Centre pointed out last week that this equates to 4.2 percent of net GDP, with the projections showing an increase to a net 7.1 percent by 2060 – still below the average net cost for public pensions, 7.3 percent, among OECD member states.
Additionally, as part of the new proposal, the eligibility for new permanent residents mean they would now have to live here for 20 years before collecting the pension, instead of 10.
National plans to present the relevant legislation to the newly elected parliament next year, but there’s little support among their colleagues.
The opposition and National’s support partners, excluding ACT, oppose raising the retirement age. Labour Party leader Andrew Little said, “Life expectancy may have changed, but bodies wear out pretty much at the same rate as they always have done”.
Council of Trade Unions President, Richard Wagner, concurred, saying the plan would be too tough for people working labour intensive jobs and the age should stay at 65.
“This policy is being created in a context of government that doesn’t like to spend money on people whether it be health, education or retirement,” Wagner said.
Andrew Little also said it’s time the government resume contributing to the fund if they wished for the scheme to become affordable in the long run. In 2009, the government stopped making contributions (until then around $15 billion), saying they would continue in 2020.
The Maori Party opposes a change and repeated their position of lowering the age to 60 for Maori and Pasifika, who have lower life expectancy. ACT’s David Seymour argued that the change should take place by 2020 not 2037.
As per usual, the likely king-maker Winston Peters was front and centre last week after the announcement, saying “We are categorically not going to support this legislation, or a continuation of the National Party breaking its word to the constituency.”
As for the politics and optics of the announcement, English has driven the initial headlines and forced the other political parties to tell the country where they stand on the age of retirement, a common election issue. Last election things were different, with Labour advocating for change and National defending the scheme’s affordability.
Despite its unpopularity, the National Party will feel confident that their older voting base won’t kick up a fuss; those born on or before 30 June 1972 won’t be affected and the base would probably see this as a wholesome final step in burying the remnants of the tax-sucking welfare state.