67 - Time to Retire?

In less than a month, New Zealand will go to the polls in a national election. These happen every three years and the weeks leading up to them are filled with almost daily polls, more politicians at photo shoots and every spare lawn, fence and road side filled with coloured signs telling you to vote for one party or another. (I’ve never understood the benefit of these signs, which undecided voter would ever be swayed by them? “Oh look dear, there’s the five hundredth “Vote National/Labour” sign we’ve passed on this ten kilometre drive, I suppose we should vote for National/Labour then.” I mean, who does it appeal to?) 
Aside from all these doings, we also see lots of policy announcements.  One that has garnered some attention here over the past few days has been the superannuation policy of the Labour Party – the current major opposition party. It has announced that it plans to raise the age at which you can receive the pension in New Zealand from 65 to 67.  This is to take account of the rising life expectancy of New Zealanders and the fact that the baby boomers are starting to retire – more people will be claiming the pension while a smaller percentage of the population will be paying for it through working.  This announcement is a welcome addition to the political debate as the retirement age and the cost of retirees is certainly something that we need to confront in New Zealand (as well as in many other countries around the world).  However, unfortunately the current New Zealand Prime Minister, John Key, has steadfastly ruled out any changes to New Zealand’s retirement age and has previously said that he would resign from Parliament before the retirement age would go up under his watch. 
The announcement by Labour is to be welcomed as it shines the spotlight onto the unsustainability of the current New Zealand pension scheme, which is touted by some as “the most generous public superannuation scheme in the world.”  New Zealand’s pension is not means or asset tested and is linked to the average wage and adjusted for inflation.  Some changes are going to be needed to this system as it is simply unsustainable in a society with a declining working age population and a longer life expectancy for the elderly.  
However, before we start rejoicing, there are a few things to keep in mind.  Firstly, you would be a brave punter to stake the family house on Labour being in Government after this election.  Furthermore, even if Labour do win and do get to implement their policy, it only starts kicking in at 2020 and the retirement age will only hit 67 in 2033.  Now, if a week is a long time in politics, then 2033 is well off the radar.  There is no way of knowing if what is being put in place now will survive intervening economic crises,  elections and changes of Government.  Additionally, the long time frame will do nothing to reduce the burden imposed on the Government by the baby boomer generation retiring as that generation will be too old to be affected by the change, according to a Professor at Waikato University.  Other commentators on the right in New Zealand are supportive of the direction of the Labour policy (not something that happens every day!) but do think that the move is more headline grabbing than the substance merits.  The change that such commentators are asking for is to means test superannuation – this would save money as those who are able to support themselves without the pension would no longer get a Government subsidy that they don’t need.  While I do not think that the Labour policy is anywhere near a panacea, it is at least based upon a recognition that we cannot keep a retirement age at 65 while the population is rising.  It will be interesting to see whether this policy gains any support from voters or whether it will be as popular as similar moves were in France last year…


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