Changes to superannuation are inevitable but don’t need to be radical – Editorial
As in most Western countries, New Zealand's population is rapidly ageing.
There are two certainties in life and your superannuation is not one of them.
As reported by the Herald earlier this week, New Zealand is barrelling towards dramatic changes to its population.
We are having fewer births, which is resulting in fewer workers, and projections of populations in rural centres rapidly ageing and eventually emptying out.
A report by by the Koi Tū Centre for Informed Futures released this week said: “The colliding trends of slowing population growth and a reliance on immigration to drive workforce and population growth, an ageing population requiring more public services and growing ethnic diversity present both opportunities and challenges.”
The labour force is forecast to shrink by an average of 4800 people per year from 2045. By then, Business New Zealand predicts a labour shortage of 250,000 people.
At the same time we are projected to having a thinning workforce, our population will also be living longer.
In the 1960s, there were seven people aged 15–64 for every person over 65. In 2025, it was four to one, and in 2065 it is forecast to be two to one.
Those in the 15-64 age bracket are the workhorses of our tax base and are funding the universal Super.
The irony is some younger people paying into that Super today with their tax dollars may never reap the rewards.
Labour leader Chris Hipkins has said he is open to discussing whether New Zealand’s superannuation should be means-tested.
Hipkins told Newstalk ZB’s Kerre Woodham he would not want full means-testing of the country’s pension but added “there are questions”.
“I am open to a conversation about that, but I think it has to be done in a constructive, bipartisan way.”
It is a change in tone from Hipkins, who has previously said it would be “very, very unfair” on some workers to lift the age.
That comment came after Prime Minister and National Party leader Christopher Luxon hinted last year the party would look at raising the age.
The policy on the party’s website currently reads: “National will keep the NZ Super age at 65 until 2044, when it will be gradually lifted to 67. This change won’t affect anyone born before 1979.”
The issue with this is, 2044 is a nearly two decade-long road to kick the can down.
Many Western countries have already had this conversation and begun to make changes.
Denmark is raising its pension age in stages to 70 for those born after December 31, 1970.
France, through much controversy, has raised the pension age from 62 to 64 and is now debating how much further to go.
In Australia, the qualifying age for the Australian pension is 67 for anyone born from 1957 onwards. The United Kingdom has followed and begun to raise its age of eligibility to 67 too.
“I guess it depends whether there is an appetite across the Parliament to even have that conversation,” Hipkins said.
If we want to have a fiscally sustainable superannuation scheme, we need to have this conversation now and today’s politicians need to develop an appetite.
In an election year, tinkering with any voter’s Super may be seen to be politically unpleasant. It is unlikely either major party will enter the election with a policy to make changes in the near future, but rather offer ideas and plans for more distant moves.
Much like the changing demographics of our country, changes to our Super will provide opportunities and challenges.
What is certain is that if we don’t at least have the conversation now, changes will not just be inevitable but radical.