The Retirement Commissioner is worried about the financial impact of Covid-19 on pre-retirees and wants the Government to consider upping the financial incentives to save more into KiwiSaver.
Yesterday a global review of retirement income systems by actuarial consultants Mercer gave New Zealand's system a B rating and warned the economic impact of Covid-19 would heighten the financial pressures many retirees face.
David Knox, senior partner at Mercer and lead author of the study, said the economic recession caused by the global health crisis had led to reduced pension contributions, lower investment returns and higher government debt in most countries.
"Inevitably, this will impact future pensions, meaning some people will have to work longer while others will have to settle for a lower standard of living in retirement.
"It is critical that governments reflect on the strengths and weaknesses of their systems to ensure better long-term outcomes for retirees."
Jane Wrightson, who took up the Retirement Commissioner role in February just six weeks before New Zealand's first lockdown, said she shared that concern.
"Absolutely it is a clear and present danger post Covid, no question. The whole industry and big chunks of government are worried about exactly the same thing."
Wrightson said the impact from Covid in New Zealand was largely on pre-retirees.
"Retirees of course have seen their investment or savings balances go down and the low or no-interest environment certainly doesn't help. That will be eating into their capital a lot faster than they predicted."
But research Wrightson's Commission for Financial Capability undertook during the first lockdown showed that cohort was currently one of the most comfortable.
"But the pre-retirees and the millennials have to think very hard now. The hardest thing to think about is long-term saving - this is going to take the country a long time to get over."
New Zealand's government debt levels have spiked with its Covid-19 response and are expected to remain high for years to come prompting some to call for the age of eligibility to rise to make the cost of superannuation more affordable.
Prime minister Jacinda Ardern has ruled out raising the age under her leadership but there are other tweaks that could be made to trim the cost.
Wrightson said while Covid's impact on pre-retirees was probably not top of mind for the new government, affordability of New Zealand Superannuation likely would be.
But she said there was not enough data or analysis to back up the knee-jerk calls to raise the age of eligibility.
"That is such a big policy step, you have to have a very reasoned and good analytical assessment of the situation and that is what we intend to do over the next year.
"I want to properly evaluate that argument."
Wrightson has just released a mission statement defining the purpose of New Zealand's retirement income system - the first time that has been done.
The mission statement was formed using an expert advisory group of academics and policy specialists.
It states that the system is designed to provide a stable retirement income framework [which] enables trust and confidence that older New Zealand residents can live with dignity and mana, participate in and contribute to society, and enjoy a high level of belonging and connection to their whānau, community and country.
To help current and future retirees achieve this the framework's purpose is twofold; to provide New Zealand Superannuation to ensure an adequate standard of living for New Zealanders of eligible age and to actively support New Zealanders to build and manage independent savings that contribute to their ability to maintain their own relative standard of living.
Wrightson said it would be releasing a series of policy papers over the next year or two in very plain English that would be aimed at the general public so that people could understand the competing tensions.
She will look at the affordability argument, means testing and age eligibility.
Wrightson also wants the Government to think about how there could be better incentives for people to put money into KiwiSaver.
"Because that is the long-term key to the millennials - while it might cost the Government money in the short-term it really does help alleviate the long-term liability."
Last year's Retirement Policy Review recommended the Government's annual contribution change to incentivise more voluntary saving to KiwiSaver by putting in $2 for every $1 up to $2000 per annum. Currently people get 50c for every dollar they put in up to $521 from the Government annually.
"I do think we need a better kick-start again. What the numbers are and how it would work - we need to do some work on that - but the first thing is to get it on the agenda."
She admitted the Government would not be that keen to think about that at the moment given they have "fiscal problems" all over the place.
"But I think it is my job to point out there are benefits in areas around here that could save them money in the long-term."
Wrightson said encouraging more personal savings could mean the Government could hold off on pension increases in the future.
"If there is evidence people have got a reasonable degree of saving ... the problem of course is we are a low-wage economy - so it is very hard to save long term and because of that of course you need to start early, which is something we always mean to do and sort of forget."