Higher pension age and residency rules will affect 120,000 people in first year, paper shows

Prime Minister Bill English (right) and Finance Minister Steven Joyce announcing the Government's superannuation changes on Monday. Photo / Mark Mitchell

National's superannuation changes will affect 120,000 people in the first year they are fully implemented, newly-released papers show.

The papers also showed that some of the savings made by lifting the pension age will be offset by the large number of people who will still require welfare or other support.

Finance Minister Steven Joyce today released the Cabinet Paper for the Government's Super proposals, which will lift the pension age to 67 by 2040 and require migrants to live in New Zealand for 20 years, rather than 10, before they can get New Zealand Super.

It showed for the first time how many people would have to wait longer or would miss out altogether once the policy came into force in the 2040/41 year.

An estimated 113,000 people would no longer be eligible for super because of the higher age of eligibility, and around 6800 people would miss out because they no longer met the residency requirements.

The total number of people affected would rise to 122,400 in the 2045/46 year, and 137,200 in the 2050/51 year.

The papers showed that the groups most likely to be negatively affected by the policy change were those with high health needs, the disabled, and people who have been in physical jobs and were not able to work past 65.

These people would be eligible for other support, such as unemployment and disability benefits. But the payments were lower than the super entitlements.

The impact of the changes on people in physical work is one of the factors which has influenced the Labour Party's policy to keep the age at 65.

Joyce proposed a review in 2030 to check the potential impact of the higher pension age on several groups. The review would determine whether any further support was needed for people who could not work past age 65.

The proposals are designed to make the super scheme more fair and affordable, and the paper reiterated that the policy package would save $4.3 billion a year (0.6 per cent of GDP) by 2041.

However, those savings would be eaten into by the increased welfare bill for 65 and 66-year-olds who could not work. The estimated annual cost was $520 million, cutting the total savings to $3.8b.

Furthermore, the Treasury estimated that between 35 and 50 per cent of migrants affected by the stricter residency requirements would move to New Zealand earlier so they could be eligible for a pension.

Another 30 to 35 per cent - or 3100 people - would get unemployment or living support instead of a pension.

That meant just 20 to 30 per cent of migrants who had not been in New Zealand for the required 20 years would miss out on financial support altogether.