Face hard choices on super, NZ told

Kent Weaver, who has travelled the world studying retirement savings policies, said New Zealand needed to face up to its ageing population.

"The fact is New Zealand has an ageing population - it's not as big a problem as in other countries, but the question is how are you going to finance it?"

Weaver said New Zealand faced four main choices - have people work longer, pay people who are retired less, pay more from the Government Budget towards superannuation or encourage people to save more.

Weaver said compulsory superannuation was one factor New Zealand should consider.

"Most other countries are moving in the same direction of compulsion for independent savings programme. It's certainly an option worth considering."

Weaver said the Government needed to consider how to reduce the administration costs of superannuation so it did not eat into retirement savings.

It also needed to make sure the default option - the one people get allocated to if they don't choose their own - was simple.

"It's important for those people that aren't very engaged - and most people aren't very engaged in their retirement savings."

Some countries such as Sweden had adopted a default option that shifted over time depending on the age of the person saving.

Raising the age of entitlement was also an option although this was considered a political challenge.

Weaver said politicians seemed to view the option with a Not In My Backyard (Nimby) frame of mind he referred to as "not in my term of office".

"The issue is very difficult especially for manual workers. It does create particular challenges."

But Weaver believed New Zealand would have to look at it in the future.

In the United States the decision to progressively lift the age of eligibility from 65 to 67 was made in 1993 but it didn't begin to phase in until 2001.

Weaver said superannuation changes were also difficult for politicians to address.

"Politicians are even more risk averse than individuals - most people don't think they will die in the next three years but politicians are highly aware their party could leave Parliament in the next three years."

Weaver said if New Zealand did nothing to change its retirement policy it would put a squeeze on the country's budget and might mean other things would receive less or no money.

"With an ageing population there are also hugely increased health costs - so what else are you going to be able to afford? Good schools or universities. Hard choices will have to be made."

Weaver said New Zealand should have addressed the problem 10 to 20 years ago.

"But given we can't go back in time, sooner is better to start the debate. It has been a supreme political football in New Zealand."

Weaver believed the country needed to build a consensus among the experts and depoliticise the issue.

The Retirement Commission will this year carry out its three-yearly review of income policies and is expected to report back to the Government by the end of the year.

AN OLD STORY

What: The Retirement Commission is holding a conference on Retirement Income Policy and Intergenerational Equity.

Where: Wellington.

When: Today and tomorrow.