Retirement issues 'must be addressed'

Politicians have been warned they need to address the future cost of New Zealand's aging population before it is too late. File photo / Thinkstock

Politicians need to address the future cost of New Zealand's aging population before it is too late, a retirement policy expert says.

Her comments come after Retirement Commissioner Diana Crossan accused politicians of having their "heads in the sand" following a Government decision not to raise the pension age of eligibility.

The commission's recent Review of Retirement Income Policy recommended the age be raised to 67 years by two months a year until 2033, however Prime Minister John Key has ruled it out.

Auckland Associate professor and co-director of Retirement Policy and Research Centre, Susan St John, said the issue needed to be addressed now.

"When we look into the future and you see the mushrooming numbers of the those in the 85-plus category, especially after 2030 when the baby boomers start to reach 85, and you see the pressure on the long-term care services, we do need to have a discussion. To have a discussion you have to take it out of the political three-year cycle.

"It's not an issue the politicians are talking about now, by the time they do get to talk about it we are going to be well into the problem when it is very difficult to make changes, they've got to be signalled.

"So there is some urgency about the politicians starting to wake up to this issue. It is a major issue."

Ms St John, who is heading to Australia to deliver a paper on the long-term care of elderly and countries pay for it, is disappointed in the lack of political will to address the issue.

"Certainly it is foolish to shut off the options because the more you do that the further out the possibility becomes of actually putting something in place."

Ms St John said a recent Retirement Policy and Research Centre paper argued raising the superannuation age was not the only solution, instead a combination of changes were required.

"What we've argued is there are three things you can do. You can reduce the level of New Zealand super, you can put up the age, or you can do some sort of claw-back from people who don't need it - as we used to when Muldoon introduced it, when the top rate was 50 per cent. Now the top tax rate is only 33 per cent - the top end are retaining much more in net terms than they used to.

"So there is scope for revisiting that issue, and doing some subtle combination of raising the age and revisiting the taxation of New Zealand super.

"There are ways of doing it without which are not reintroducing a means test or a welfare benefit-type testing, but doing it through the tax system, which makes it fairer and would be effective in reducing the cost over time.

"I don't want the rate of New Zealand super to go down because there is no evidence that it is too generous for those who need it most.

"What you have to have is a bi-partisan agreement or multiparty agreement - this is a long-term issue."