Retirement policy experts have questioned a recommendation to keep the New Zealand Superannuation age at 65 and say that while it may be affordable the funds could be better used elsewhere, such as paying for the increasing healthcare costs of older people.
Interim Retirement Commission Peter Cordtz released the 19 recommendations from its three-yearly review of retirement income policy on Wednesday morning with a topline recommendation the age of eligibility for NZ Super be kept the same.
The report said New Zealand could afford to keep it at 65 for at least the next 30 years, a view that was in sharp contrast to two previous reviews of retirement income policy which both recommended an age rise to 67 due to the rising cost of NZ Super as more people head into the over-65 age group.
• What you need for a comfortable retirement
• Worried about not having enough in retirement? Here's how to reduce the pressure
• Tips for making wealth last once you hit retirement
• How New Zealanders miss out on hundreds of thousands in retirement savings
But Claire Matthews, a retirement policy expert at Massey University, said: "At one level absolutely it is affordable. But I think it becomes a question of is it the best use of the funds, to be funding a retirement at an age when retirement should be a choice rather than a necessity."
She said retirement at 65 was a nice to have as was demonstrated by the numbers of people continuing to work between the age of 65 and 70.
"Could these funds be put to a better use such as funding healthcare in that age-group?"
Matthews said the demand for healthcare was high, particularly for those in that age group and it may be better to use the money for more hip and knee replacements because they could be "quite detrimental" to a person's quality of life.
"Is it affordable? Maybe it is but is it the best use of funds?"
Her sentiment was echoed by financial adviser Martin Hawes, who is also on the investment committee of the Summer KiwiSaver scheme.
"I think the question is New Zealand Super affordable is the wrong question. Things can be affordable but still not wise."
Hawes likened the situation to a couple in Auckland reaching retirement with a mortgage-free house and whether they could afford to buy a Lamborghini.
"Could they sell the house and buy it? Yes. But is it wise?"
Hawes said increasing the age of eligibility slowly over a decade would cut down the amount the Government spends on superannuation.
"We could leave it alone and afford it or change it and put more money into healthcare and education."
Hawes said New Zealand should look at whether it would be wise to spend a bit less in one area to enable spending in another area.
Treasury is projecting that NZ Super will cost under 7 per cent net if national GDP by 2060, a rise from today's 4.8 per cent but still under what other OECD countries already spend on super.
The report warned that not only was raising the age not needed in the next 30 years but doing so would impact unfairly on Maori and Pacific New Zealanders who on average have a shorter life expectancy.
It also warned that falling home ownership rates meant people were nearing retirement less prepared that previous generations.
Matthews said she accepted it was a concern for Māori and Pacific people but said the issue of their shorter average lifespans should be addressed directly rather than using retirement policy to cover for it and the same should be done for falling home ownership levels.
"That is where the focus should be."
Hawes said if the age was raised the savings could be used to help those who needed it most.
The report also said if the Government did not agree with its assessment that NZ Super was affordable in the medium term it should consider other options alongside raising the age including changing tax rates which could claw back super from wealthier recipients.
Hawes said a type of means test would be harking back to the 1980s when a super surcharge was used and was hugely unpopular.
"It was met with an extremely bitter reaction from older people who believed they were entitled to receive NZ Super after working a whole lifetime.
"No politician would do it. I don't think that will ever fly."
Matthews said she was "totally opposed" to means testing.
Matthews said it totally distorted people's behaviour and would disadvantage some New Zealanders.
She said poorer people would be fine while the well-off would manage to find ways around it and those in the middle would get hit.
"Middle New Zealand gets hammered again."
Kris Faafoi, Minister for Commerce and Consumer Affairs, said the review raised a number of important issues in relation to New Zealanders' wellbeing and financial independence in retirement, particularly for vulnerable people.
"It is important to be thinking about how all New Zealanders can best be supported to ensure their wellbeing in retirement," he said.
Faafoi said he would be paying close attention to the recommendations and would respond to the review in fuller detail by the middle of the year.