NZ Super reforms: Nicola Willis says change can be less ‘dramatic’ than OECD report

Finance Minister Nicola Willis says changes to NZ Super need to be made, but they don’t need to be as drastic as those suggested by the OECD.

A wide-ranging report released yesterday by the Organisation for Economic Co-operation and Development recommended linking NZ Super eligibility to life expectancy, while “considering occupational and ethnic differences”. It also recommended hiking Kiwisaver payments.

Willis told Newstalk ZB’s Mike Hosking Breakfast she appreciated getting policy insights from an external perspective.

“We are going to have to do something. If you’re sensible, you listen to these facts.

“In the 1960s, there were around seven New Zealanders of working age for every person aged 65 or older. Today, there are four, and by 2065 there will only be two. So that burden on our taxpayers is increasing significantly.”

Between last year and the end of the fiscal period, the cost of NZ Super would increase by about $6 billion a year, she said.

The cost was projected to climb from just over 16% currently to more than 20% of every tax dollar.

“Every dollar we’re spending on superannuation is a dollar not available for education, for health, for infrastructure.

“So gradually, over time, some changes will need to be made. They don’t need to be as dramatic as the OECD suggests, but some adjustments will be needed.”

National campaigned on raising the age of NZ Super in the last election, saying it would remain at 65 years until 2044 before gradually increasing.

In an interview with Herald NOW’s Ryan Bridge last year, Willis confirmed increasing the age of eligibility was still on National’s agenda but said it would not progress before the 2026 election.

She believed there were benefits to universal superannuation and any change would have to be phased in slowly.

OECD: Debt will become unsustainable without reforms

Yesterday’s OECD report warned the global energy shock from the conflict in the Middle East was “weighing on confidence, slowing the recovery and putting renewed upward pressure on inflation” for New Zealand.

“Ageing is putting increasing upward pressure on the fiscal deficit and, without reforms, public debt will rise unsustainably towards 200% of GDP,” it said.

Along with linking eligibility to life expectancy, the report recommended means testing for the top 10% of earners, and tax reforms to “increase private pension accumulation”.

It also pointed out the situation was complicated by significant differences in life expectancy across ethnic groups.

“A simple increase in the public pension age could have regressive effects, particularly for Māori and Pasifika, who on average have shorter life expectancy.

“Public pension reforms would therefore need to include redistribution and protection for vulnerable groups to avoid inequitable outcomes.”

They could also include enhancing support for older workers in physically demanding roles.

Sign up to The Daily H, a free newsletter curated by our editors and delivered straight to your inbox every weekday.