Dunne plan: Super from age 60 at reduced rate

Mr Dunne said Maori, Pasifika and other demographic groups with shorter life spans would benefit most from his policy. Photo / Sarah Ivey

Idea would let over-65s get paid more if they put off taking money by a year or two.

The Government is warming towards Peter Dunne's flexible super plan in which 60-year-olds could draw a pension, despite John Key's commitment not to alter the retirement age.

Mr Dunne's plan would allow people to choose to take a reduced rate of NZ Super from the age of 60 up to 65, or an increased rate if they deferred taking up superannuation until after 65 up until the age of 70.

Yesterday, he released a Treasury discussion document on the proposal which the Government is committed to considering as part of its post-election deal with him in 2011.

Despite that deal, he acknowledged National had initially been cool on the idea but said the Government was now more receptive.

"Over the last few months, they've moved from a position of what might be described as diffidence to being one of slightly more interested."

Yesterday, Prime Minister Key said the idea was "not without merit" and it was possible his Government would support it, possibly even introducing it in next year's Budget.

The issue of the retirement age or age of eligibility for NZ Super has been a political football in recent years, with Mr Key pledging not to alter it from 65 but Labour saying it would raise it to 67 to help with the long-term affordability of the scheme.

Mr Dunne said his proposal was a "win-win" for both major parties.

"It does get both off their respective high horses."

However, Mr Key said it was important to understand the policy was fiscally neutral and would have little effect on the overall cost of super.

Mr Dunne said Maori, Pasifika and other demographic groups with shorter life spans would benefit most from his policy.

The discussion document notes risks that the policy could cost the Government more than current settings because of a potential increase in the total number of people receiving NZ Super and the need for additional assistance for those who take it early but find it insufficient to live on.

The public has until October 11 to respond to the discussion paper and the Government will decide after that what action it takes.

Pension pliability

Peter Dunne's flexible superannuation proposal:
Would allow people to receive NZ Super from the ages of 60 to 64 at a lesser rate or from 66 to 70 at a higher rate compared to the rate for those who receive it from the age of 65
*For example, a single person eligible for NZ Super from the age of 65 currently receives $357.42 per week.
Under the proposal the amount they received would be:
*$279.06 per week if they first took payments at age 61
*$523.30 if they waited until the age of 69
For a couple currently receiving $549.88 between them:
*$403.56 a week if they first took payments at age 60
*$885.59 if they both held off until age 70
*The rates would be unchanged during the life of the recipient
*The change would not affect the rate of payment to those already receiving NZ Super