The Retirement Commissioner has released a package of policy recommendations to reflect the impact an ageing population will have on the current retirement income system.
The 2013 Review of Retirement Income Policies, released this morning by the Commission for Financial Literacy and Retirement Income, was designed to make New Zealand's system of retirement sustainable for the future, Retirement Commissioner Diane Maxwell said.
"We're entering a period of unprecedented demographic change, with around one in four New Zealanders aged 65 and over by mid-century.
"The shape of our population will have changed and some social norms along with it. It's a positive change, but it will require some planning."
The review looked at the issue from different perspectives including the sustainability of New Zealand Super, and the role of KiwiSaver and other private savings in providing an adequate retirement income.
As common with many other countries, New Zealand's retirement income policies were subject to stresses from permanent change in the age structure of the population because of increases in life expectancy and lower birth rates, the review stated.
While NZ Super was a relatively inexpensive scheme, due to an ageing population, fiscal pressures were coming to bear.
One way to solve the problem was through economic growth, but that was unlikely to be sufficient on its own, the review stated.
Policy changes were also needed to ensure that the retirement system remained sustainable.
The current retirement income framework was excellent and achieved good outcomes for the majority of people aged 65 and over, Maxwell said.
Rates of poverty were relatively low for the group, thanks to a combination of New Zealand Superannuation, high levels of home ownership and other government policies and programmes.
However, there were signs that future outcomes would become unevenly spread, with some people arriving at retirement in poor financial shape while others continued to do well, the review stated.
See Maxwell describing the future of NZ retirement and superannuation in this new video below:
There was also an increasing gap between the standard of living that superannuation could provide and the standard of living which many aspired to.
"New Zealand as a country doesn't have a great record of saving," Maxwell said.
"Increased levels of private saving can happen through contributions to KiwiSaver or a range of other savings vehicles."
NZ Super could be topped up through increased private saving or increased income through wages and salaries from working longer, she said.
Another major recommendation in the review was for a mechanism to automatically adjust the age of eligibility for NZ Super (NZS) over time to reflect increasing longevity.
"Raising the age of eligibility for NZS will make retirement income policies fairer between generations and ease pressure on the Government's budget."
Retaining NZ Super would therefore become more economically and politically sustainable, the review said.
Maxwell also proposed keeping the age of access to KiwiSaver funds at 65 but bringing in auto-enrolment for employees who are not currently members of KiwiSaver, with retention of the right to opt out.
Another suggestion was for the Government to address taxes which discouraged long-term savings.
The Review of Retirement Income Policies have been released as a discussion document, and contains a package of 16 recommendations.
After considering feedback, the commissioner would make her final recommendations to the Government by the end of the year.