Some people may be forced to live off their KiwiSaver for two years while they wait to get New Zealand Superannuation, an academic has warned.

The Government announced plans this week to lift the pension age to 67 by 2040. But it will leave the access age for KiwiSaver at 65.

Susan St John, director at Auckland University's Retirement Policy and Research Centre, said people turning 65 may have no choice but to dig into their KiwiSaver if they can't work and the benefit is asset-tested.

"If there is nothing but a welfare benefit that is means tested and KiwiSaver funds are part of that means test then people who can't sustain adequate levels of paid work will have no alternative but to erode their savings pots."


"So not only do the people struggling already to work at 65 not get the pension they need at 65 but when they do reach the magic age of 67 they may have little else to call on for additional income."

St John said its research showed retirees needed around $10,000 a year on top of NZ Super to have a modest retirement.

"This requires a sizeable lump sum especially when the Government doesn't help retirees with mechanisms to annuitise fairly."

St John said well-off people would be fine with the NZ Super age at 67 but it could be crippling for others.

"These 'others' may not enjoy the same average longevity prospects directly as a result of this policy."

But David Boyle, group manager investor education, at the Commission for Financial Capability which last year recommended the Government keep KiwiSaver access at 65 while increasing the NZ Super age to 67, admitted it could see people using up more of their KiwiSaver at the beginning of their retirement.

But he said the 20 year transition period meant people had time to plan for the extra amount and save for what they might need.

"They can think about 'how much do I need to save to make up that gap'."

He said that amount could be equivalent to two years of NZ Super - around $18k per year for individuals and $23k per couple.

Boyle said it had wanted the KiwiSaver age de-coupled from the pension age so people could have certainty over when they would get access to their own savings.

And he said if the two were separated there should be a public debate over whether access to KiwiSaver stayed at 65.

"I think there still needs to be a discussion around what is the right age."

The commission has not proposed a specific age for KiwiSaver access and Boyle said there may not be a one-sized fits all approach.

Binu Paul, principal of SavvyKiwi said it was good thing that the government planned to keep the KiwiSaver access age at 65 because changing it created trust issues over constant tinkering of the scheme.

"I am glad it is not being coupled with this change."

The proposed pension age change would not come up for a law change until after the election.

More than 2.7 million people are signed up to KiwiSaver with over $34 billion invested.

A spokeswoman for Finance Minister Steven Joyce said that the Government recognised that people expected their KiwiSaver to be available from age 65.

"And we respect that - it will give them more flexibility to draw down their KiwiSaver funds when they choose," she said.

"The Retirement Commissioner recommended decoupling in her Review of Retirement Income policies last December.

"People will ultimately make their own decisions about the use of their KiwiSaver funds but in regards to people unable to work past 65, there are existing mechanisms for the Government to provide financial support through Work and Income.

"On top of that the Government will legislate for a review in 2030 to consider whether any temporary support is needed for people not able to work beyond the age of 65."