The retirement eligibility age should be increased from 65 to 67 by 2033, a review recommended yesterday - but Prime Minister John Key said there would be no change on his watch.

Retirement Commissioner Diana Crossan believes the age should start to increase from 2020 by two months a year until 2033, when it would reach 67.

At the same time, a means-tested benefit should be introduced to help people such as manual workers, who can not work after the age of 65, to cope financially until they turn 67.

Mrs Crossan also proposed changing the formula used to calculate the annual increase in superannuation.

It is now set as a percentage of the average annual wage.

But Mrs Crossan said that from 2020, the rate adjustment should be based on the mid-point between the increase in the consumer price index and the average weekly earnings.

She said the changes were essential to preserve New Zealand Superannuation for the next generation.

"Something will have to change to keep New Zealand super affordable for the long term," she said.

"We know there is a huge number of baby-boomer superannuitants coming, and we can't keep on ignoring this issue until it's too late.

"Even if policy is not altered overnight, the need for some future adjustment should be publicly acknowledged and the adjustments prepared for gradual introduction to help offset the rising future pension cost burden.

"Without such adjustment, the pressure on other parts of the government budget, such as education and health spending or debt servicing, will simply become even greater."

National promised in the 2008 election campaign not to raise retirement ages, and Mr Key said that stood.

"We're going to continue to pay super at 66 per cent of the average wage for New Zealanders 65 and above."

He disagreed with the assertion the current age had to rise. "New Zealand super is sustainable at age 65," he said.

Superannuation now costs about 4.5 per cent of gross domestic product - essentially the value of New Zealand's economy - but that is predicted to rise to 6.5 per cent by 2035 if no changes are made.

From next year, the first of the baby-boomer generation will start turning 65.

The commission says about 40,000 people will turn 65 next year but that figure for 2021 will be more than 52,000.

Mrs Crossan said the decision on any changes needed to be made now to give people time to plan.

"One of the things we have always said is we need to give people time. Ten years is a good time to start the process. Now is the time to do it. We think it is imperative."

She said the last time the retirement age was raised - from 60 to 65 - it was done quickly.

The commission had set 67 as the age to raise it to as that would still give most people who reached 65 about 20 years living on New Zealand Superannuation.

"We just think that any higher than that would be unacceptable, people couldn't imagine it."

Mrs Crossan said making the changes now would enable the costs to be kept down for the next 30 years, reducing the cost increase to 5.5 per cent of GDP by 2035.

PENSION AGE
PROPOSED CHANGES IN NZ

Year born......... Age eligible
Before 1955.......65 yrs
1955..............65 yrs 2 mths
1956..............65 yrs 4 mths
1957..............65 yrs 6 mths
1958..............65 yrs 8 mths
1959..............65 yrs 10 mths
1960..............66 yrs
1961..............66 yrs 2 mths
1962..............66 yrs 4 mths
1963..............66 yrs 6 mths
1964..............66 yrs 8 mths
1965..............66 yrs 10 mths
1966 or later.....67 yrs

OVERSEAS CHANGES
Ireland: 67 by 2021, 68 by 2028
Australia: 67 by 2023
Netherlands: 67 by 2025
Denmark: 66 by 2025, 67 by 2027
USA: 67 by 2027
Germany: 67 by 2029
Britain: 66 by 2020, 67 by 2036, 68 by 2046