New Zealanders will need as much as $200,000 in savings to augment NZ Super payments and provide a comfortable old age, but some low income New Zealanders have little chance of reaching that target, the Retirement Commission has warned.
Retirement Commissioner Diane Maxwell yesterday released a draft of the commission's three-yearly review of retirement income policies settings which once again called for an increase in the age of eligibility for NZ Super from 65 to maintain the affordability of the scheme.
The report estimates New Zealanders would need as much as $205,000 of their own savings for a comfortable retirement, but noted other estimates put that figure as high as $390,000.
Ms Maxwell said the need for greater private savings was behind the commission's recommendation to enrol all New Zealanders in KiwiSaver and its push for greater financial literacy.
She told the Herald it was important for young New Zealanders to begin saving early to provide for their retirement, particularly those in lower-paid jobs and those with physically demanding jobs in which they could not continue until 65. Even then, "there's another group for whom wages are so low that no amount of rhetoric from me or anyone else is going to fix this and that's about a bigger, broader social issue around wages, around all sorts of social inequities that need addressing".
The commission's recommendation to link the age of Super eligibility to lifespan would see New Zealanders receive Super at age 66 by 2037 and 68 by 2056.
Ms Maxwell said the increase would save about $1.5 billion annually.
A similar amount would be saved by another of the 16 recommendations - changing the amount of NZ Super paid by linking it to cost of living increases as well as average after-tax earnings.
Over time that would lead to NZ Super losing ground on average earnings and risk pushing some older New Zealanders into poverty. To address that, a portion of the $1.5 billion savings would be "redistributed to those that will need it the most".
Prime Minister John Key has said he would resign rather than lift the NZ Super age.
Acting Finance Minister Steven Joyce yesterday said Treasury's long-term fiscal projections showed NZ Super was "quite affordable right out to 2060 so we're a long way past 2060 for it to be a big problem".
Labour's policy is to lift the age to 67 over several years to 2020.
Labour leader David Cunliffe said Mr Key and his Government were not telling New Zealanders the truth about the issue.
"I believe he understands very, very well that there's a huge fiscal hole ... if some responsible change is not made.
"The trick is to signal it early so New Zealanders have every opportunity to make adjustments in their personal lives."
Retirement Commission recommendations:
* Lift the age of eligibility for NZ Super by linking it to life span so it rises to 66 by 2036, 67 by 2046 and 68 by 2056 as life expectancy increases.
* Link NZ Super payments to general inflation as well as average earnings.
* Apply some of the $1.5 billion annual savings from the change in indexation to maintain living standards for less well off older New Zealanders.
* Keep the age of access to KiwiSaver at 65 while the NZ Super age rises.
* Auto enrol all New Zealanders in KiwiSaver who are not currently in the scheme while preserving the right to opt out later.
* Tax returns on savings only on the proportion above the rate of inflation.
* Investigate means of providing greater "age friendly'' housing and workplaces.
* Deduct overseas state pension entitlements from NZ Super.