The age of eligibility for New Zealand Superannuation will increase from 65 to 67 by 2040, news that has left some questioning whether the changes are protecting baby boomers at the expense of younger generations.
The changes will be phased in from 1 July 2037 and will not affect anyone born on or before 30 June 1972 announced Prime Minister Bill English yesterday. The change will be legislated for next year.
“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,” says English.
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.
Finance Minister Steven Joyce says 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,” says Joyce. “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.”
“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,” says English.
However, Jordan Williams of the Taxpayers’ Union says the “changes do not go far enough”.
“We were looking for means testing, or some other measure which prevents young families earning ends meet from paying taxes so millionaires can enjoy pensions.”
ACT leader David Seymour agrees, saying that by delaying the age increase the Prime Minister is protecting baby boomers, while “pulling the rug out from under young people”.
“The Government has today kicked the can down the road by 20 years, saddling future generations with the brunt of the change,” says ACT Leader David Seymour. “It’s intergenerational theft – cynical political calculus in place of leadership.
“ACT would take the Retirement Commissioner’s advice and begin raising the age in 2020 – 17 years sooner than what’s been announced today.”
The Health Funds Association (HFANZ) chief executive Roger Styles says the changes announced to superannuation eligibility helped address one of the major pressures on the Government’s finances, but left the larger pressure – rising healthcare costs – unaddressed.
“Health will be a bigger hit to the Government books than super – and unlike super, there is no easy fix. You can’t just raise the age of eligibility for surgery,” Mr Styles said.