The Detail unpacks election retirement policies as the reality of New Zealand’s increasingly costly superannuation beast starts to hit.<\/p>\n
The superannuation debate and the KiwiSaver election<\/p>\n
If you are heading towards 65 in the next few years and dreaming of retirement, watch out.<\/p>\n
You could be the first in more than two decades to have to wait longer.<\/p>\n
Certainly that will be the case if the ACT Party gets its way. The other political parties are promising to keep the pension age at 65 for now, but they have also agreed to cross-party talks on retirement after the election.<\/p>\n
It is estimated our superannuation bill will cost New Zealand an extra $3000 a minute by next decade, with warnings that costs will continue to soar as the number of older people balloons and the working population shrinks.<\/p>\n
“The arithmetic really doesn’t add up,” says Generate KiwiSaver investment specialist Greg Smith, who unpacks the political parties’ pledges on KiwiSaver and national superannuation on The Detail.<\/p>\n
“You look at the projections, and the cost of super is projected to rise from around five percent of GDP today to eight percent by 2065,” says Smith.<\/p>\n
He points out that in the 1960s, seven working people paid for one retiree in Aotearoa. Now it is about four, in 30 years’ there will be two workers to one retiree.<\/p>\n
With the political sensitivity around raising the retirement age to ease the burden, Smith says politicians are focussing on KiwiSaver as the solution.<\/p>\n
“It looks like the KiwiSaver election in many ways, certainly it’s a big sub-plot,” he says.<\/p>\n
Once the election is out of the way, New Zealanders will want to see some cross-party action on retirement and some firm decisions.<\/p>\n
“One thing that frustrates New Zealanders is uncertainty and constant change. Let’s get these changes agreed, let’s get them agreed cross-party and then let’s stop tinkering with it,” Smith says.<\/p>\n
As KiwiSaver nears its 20th anniversary, Smith says it is time for a reset.<\/p>\n
“It’s been great in those initial sort of phases, we’ve got $140 billion, we’ve got 3.4 million members and it’s made people’s retirement outcomes better than they otherwise would be. It’s not perfect,” he says.<\/p>\n
The average balance of KiwiSaver accounts of $40,000 falls well short of the $1 million needed for an urban couple who own their own home or live rent free, according to Massey University retirement studies.<\/p>\n
Also, about 40 percent of KiwiSaver members are not contributing to their funds.<\/p>\n
“There’s the element that are over 65 or they’re under 18 but there’s also a huge element that just literally can’t afford to.”<\/p>\n
Smith says the direction the political parties are taking on KiwiSaver is encouraging.<\/p>\n
National says it will progressively move to six percent contributions for employers and employees by 2032. It favours compulsory enrolment for all newborns with a $1500 government kickstart.<\/p>\n
Labour would raise employer contributions to six percent by 2032, but give more flexibility to workers. They could reduce or pause their own contributions while still receiving the compulsory employer payment.<\/p>\n
NZ First is also pushing the newborn angle, with compulsory enrolment and a government kickstart of $1000. It wants to increase employer\/ employee contributions to eight percent and eventually 10 percent.<\/p>\n
ACT will gradually raise the retirement age to 67 in the next decade but keep access to KiwiSaver savings at 65. It would keep KiwiSaver voluntary but wants to remove the tax on KiwiSaver investment earnings.<\/p>\n
The Greens and Te Pati M\u0101ori have no specific KiwiSaver policies, while Opportunity wants KiwiSaver to be compulsory with employers and employees together contributing 12 percent.<\/p>\n
Shaw and Partners executive director Andrew Kelleher says turbo charging KiwiSaver will not only benefit retirees.<\/p>\n
“You also create this pool of savings, which is then available for investment into the other areas in New Zealand that we desperately need, investment into the likes of infrastructure assets and other assets that will actually help us address the issue that we’re trying to solve,” Kelleher tells The Detail.<\/p>\n
Kelleher says the ongoing discussion around retirement creates better understanding.<\/p>\n
“I’ve got kids in their late 20s, and they certainly don’t expect the National Super to be in the same format in 30 years time when they come to retire as it is now.<\/p>\n
“It needs to be done in the next couple of years, because the longer we leave it, the less chance you’ve got of actually fixing the problem over the long term.”<\/p>\n