Retirement age will rise to cover superannuation cost, investment company predicts

Treasury forecasts say national superannuation must start at 72 or 73 to stay affordable. Photo / File

By Checkpoint of RNZ

An investment company predicts New Zealanders will have to work into their 70s if the country wants to afford superannuation.

A debate has been held at the New Zealand Economic Forum at Waikato University.

Milford Investments CEO Blair Turnbull said target="_self" rel="" title="https://www.nzherald.co.nz/topic/retirement/">40% of retirees rely entirely on income from super because they have no savings.

He believes it’s inevitable the age for super will rise and be means-tested.

He said the Treasury was very clear, saying that unless the retirement age rose to 72 or 73, New Zealand could not afford to pay superannuation.

“By 2030, we’ll have over one million people over the age of 65 and we want New Zealanders to retire with dignity and in a lifestyle they deserve.

“That is just going to compound. Why? Looking back, in the 1970s you had seven workers for every person over the age of 65. Today that’s about four workers for every person over the age of 65 and by 2060 it’ll be two workers for every person over the age of 65.

“The truth is we cannot afford the superannuation system, because we don’t have the workers and we don’t have the productivity. And just to bring the productivity point to life – in terms of the 37 OECD countries, we are 27th in the rankings in terms of productivity.

“And here’s the killer stat that follows that, in terms of our savings, we’re 33rd, so if we have lower productivity and lower wages, that, unfortunately, really hurts our ability to save because we literally don’t have the money to save for the future, even though we know we need to save.

Blair Turnbull says we cannot afford the superannuation system. Photo / 123RF

“Half of people today are just surviving pay cheque to pay cheque and the news isn’t any better for retired people because 40% of them arrive at 65 and they have little to no private savings and they’re fully reliant on income from New Zealand Super, which we simply can’t afford.”

Former cabinet minister David Parker told the conference that we have to match Australia on their better superannuation savings rate.

“I’m in favour of following Australia into compulsory KiwiSaver and there should be a tax incentive.”

Former MP and CEO of the Aged Care Association Tracey Martin said a much broader conversation was needed than whether the age of superannuation should be raised.

Sharon Zollner, ANZ’s chief economist, told the conference the healthcare costs for older people were also a consideration. She said the health needs of people over 85 cost five times more than those aged 65.

- RNZ