Minister qualifies super affordability

Commerce Minister Paul Goldsmith said the cost of superannuation would rise from 5 per cent of GDP to 7 per cent of GDP by 2045.

New Zealand Superannuation will still be affordable in the future, provided the government keeps control of other spending, according to commerce minister Paul Goldsmith.

Goldsmith told international attendees of the NZ-OECD High Level Symposium on Financial Education that the cost of superannuation would rise from 5 per cent of GDP to 7 per cent of GDP by 2045.

The National-led government has ruled out increasing the age of eligibility for superannuation to help mitigate the increasing costs being driven by an aging population.

Other countries have already put in place plans to increase their retirement eligibility ages.

But Goldsmith said NZ Super was affordable.

"We will be able to manage - if we keep control of other government spending."

That could prove a challenge with healthcare costs also expected to rise with the ageing population.

Goldsmith said New Zealand had a low level of poverty in its older population but there was still a need for people to save for their retirement.

In the past many people had focused on owning their own home at retirement and living off NZ Super, he said.

But falling rates of home ownership meant that even with the government provision there was still a need to save.

More than 2.6 million people have signed up to KiwiSaver with around 75 per cent of working New Zealanders now in the scheme.

Goldsmith said it saw KiwiSaver as a supplement to NZ Super not a replacement.

He said one of the main challenges with KiwiSaver was getting people to engage with their retirement savings and he hoped to avoid a generation of New Zealanders getting to retirement without having looked at their KiwiSaver account for 30 years or more.

Last week the minister announced plans to revamp KiwiSaver's annual member statement to provide more transparency on how much people are paying in fees and give people a better idea of how much money they could have at retirement.

The changes are expected to be in place in time for the next round of annual statements which come out around April and May.

The Commission for Financial Capability is in the process of undertaking its three yearly review of New Zealand's retirement income policy and is expected to report back to the government on its findings by the end of the year.