National and Labour spurn Brash's suggestion of flexible pension

Don Brash. Photo / Doug Sherring

New Zealand's two major parties have been quick to shoot down a novel proposal by former National Party leader Don Brash to raise the state pension age to 67, but with flexibility to retire earlier or later on different rates.

Dr Brash told an investment summit yesterday people should be able to claim the pension earlier at a reduced rate, or later at a higher rate.

"The amounts paid would be actuarially equivalent to drawing the pension at the age of eligibility," he said.

But a spokesman for Finance Minister Bill English said there would be no changes to either the qualifying age or payment levels of NZ super.

"This is built into the Government's long-term spending path and fiscal forecasts."

Labour deputy leader Annette King said Labour also supported keeping the qualifying age at 65 and saving money for it through the "Cullen fund", with people also encouraged to save extra through KiwiSaver.

Actuary Jonathan Eriksen, who chaired the session where Dr Brash spoke, said deferring the pension would allow it to increase by about 6 per cent a year to pay out the same total sum in each person's lifetime as they could have got by claiming it at the standard age.

For example, deferring the pension from a standard age of 67 to 75 would mean it could jump from the present couple's rate of $25,450 after tax to $40,563 a year.

Alternatively, claiming the couple's pension from age 60 would reduce it to just under $17,000 a year.

Mr Eriksen has made the same proposal to the Retirement Commissioner's periodic review group, but advocates raising the standard qualifying age from 65 at present to 70.

"To make it politically palatable, I'd make it accessible between 60 and 75," he said.

Dr Brash said many countries were raising pension ages. NZ super's cost was projected to rise from 4.4 per cent of the national income at present to 8 per cent by 2050.

However, Michael Littlewood of Auckland University's Retirement Policy and Research Centre said the proposal meant people who claimed their pension early at a lower rate would have to live the rest of their lives in poverty. "What happens if they get into financial hardship? Does the welfare system then pick up the shortfall?" he asked.

"My preference would be to shift the age and then allow people to make their own arrangements if they wanted to retire earlier."

HOW IT WORKS

* Retire at 67 on full super (now $25,450 for couple).
* Or retire at 60 on two-thirds of full super ($16,926).
* Or retire at 75 on $40,563.
* Super rate rises by 6 per cent for each year deferred.