Younger people may not want to hear about this from politicians or men in suits. So I asked New Zealand’s youngest bank economist, Sabrina Delgado, 25, of Kiwibank, what she thinks is in store for her generation.
Delgado said if we suddenly had no NZ Super, the country would be in trouble. But she doesn’t think it will disappear entirely during her working life. Just change form.
“Changes to NZ Super are inevitable, and it’s because we need them. It’s unsustainable at the moment, with our ageing population.”
Like many others, she suggests lifting the retirement age, and/or means testing. A third option or lever could be to change how increases are calculated.
“Currently, they’re based on wage growth. There’s conversation around shifting that to the Consumer Price Index.”
A combination of all three potential changes could work, said Delgado.
“That way, you spread the cost and benefits, and it’s less of a harsh than sudden change to one area.”
She cautioned against relying on importing workers to prop up NZ Super.
“Realistically, [immigration] is not something we can rely on.”
She said immigration is led by economic cycles, which can also result in outflows of young Kiwi workers.
By 2050, nearly one in four New Zealanders will be over 65. Photo / 123RF
Delgado both expects and would like to see changes to KiwiSaver to ensure that her generation has more savings come retirement.
“We’ve already seen some of those changes in the Budget earlier this year. It’s a good start. But our savings levels are still low. The bigger problem with KiwiSaver is that it’s still not compulsory, and that’s a change we need. From there, it would be great to lift contributions and look at policies that incentivise Kiwi to contribute more.”
That would be in line with a lot of other OECD countries, said Delgado.
“You just have to look over the ditch. They have a 12% contribution [to Aussie super, the equivalent of KiwiSaver].”
Speaking to her generation, Delgado would like to see her peers take action themselves. Moving beyond property investing was a good step, in contrast to their parents, who had pulled out of capital markets after the 1987 crash and turned to property investment.
She also talks about the need to ingrain the importance of savings into our culture, especially if NZ Super undergoes structural changes.
One positive generational change on that front already taking place is younger people investing in platforms such as Sharesies, which have removed some of the barriers from earlier generations getting into investing, Delgado said.
“With my peers, those conversations around, ‘hey, I’m investing in shares and equities,’ are becoming more common and it’s a positive change. As a younger generation, we shouldn’t necessarily be waiting for these policy changes to start thinking about our retirement as well.”
Younger generations can change their financial futures with small steps, she said. In short: start early, save smart, and don’t assume that the future of superannuation will look exactly like the past.
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