Prime Minister Bill English has made the announcement – the retirement age is raising from 65 to 67.
There had been rumblings about it ever since John “I will quit as prime minister before raising the retirement age” Key stepped down at the end of last year.
It came as no surprise Grey Power Federation national president Tom O’Connor. ”We have known for some time that the prime minister was heading in that direction. We have some concerns about the rationale for the move as we are confident that national superannuation is affordable in the long term, particularly if other changes had been made.”
How is it going to work?
The changes will be phased in from July 2037 and will not affect anyone born before June 1972. The plan would see the age of entitlement for NZ Super rise by six months each year from July 2037 until it reached 67 in July 2040. So everyone born on or after January 1, 1974 will have to wait till; they are 67 to be eligible for NZ Super.
There would be no change to the indexation or universality of superannuation. But the Government is planning to double the residency requirements for NZ super so that applicants must have lived here for 20 years, with five of those after the age of 50.
English said Kiwis were living longer and healthier lives so adjusting the long term settings for superannuation while they had time to adapt was the right thing to do. Even after the change, he claims someone who retires at age 67 in 2040 was 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.”
He and the Government had a strong track record of supporting older New Zealanders. Since 2008 weekly payments to superannuitants had increased by 35 per cent after tax while inflation had 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.
English said the Government is announcing the change now so that political parties can debate superannuation transparently in the lead-up to the election.
How do we compare to the rest of the world?
Other countries such as Australia, the United Kingdom, and Canada have tweaked their old-age social welfare policies. The intent of some of those policies is no longer applicable in the first decades of the 21st century. The argument, at its simplest, calls for the retirement age to increase to reduce the overall burden on core state revenue.
In the UK, retirement ages are different for men and women, but next year this longstanding disparity will be abolished and the ages for men and women to retire will be 68. In Australia, our neighbours plan to raise the retirement age to 67. The United States and several mainland European nations also plan to increase the age.
So far it seems that no other parties support this announcement. It will be interesting to see how this issue will play out during the election campaign this year.