Superannuation costs will balloon, report warns
Updated at 8:24 pm on 11 June 2012
The body representing the savings industry says future pension costs are being seriously underestimated by the Government.
The Financial Services Council says unless unless gradual adjustments are made to the age of eligibility, entitlements may have to be slashed in a few decades or taxes raised by a third to cover the cost.
The council's estimates are based on findings on longevity by British medical journal The Lancet and local actuaries.
It says there is mounting evidence that the cost of national superannuation will double by the end of the century to 12% of Gross Domestic Product (GDP), or $24 billion in today's money.
Council head Peter Neilson says Treasury's estimate of 8% of GDP by 2050 is much too low because the department is underestimating how long people will live.
Research by the council also shows individuals underestimating lifetimes.
Mr Neilson says individuals also have to save more now to avoid facing a serious shortfall - and says the worst that will happen if New Zealanders do not live as long is that they will have more income in retirement.
Michael Littlewood, of Auckland University's Retirement Policy and Research Centre, says there is such a thing as saving too much, given the rest of the economy depends on people spending.
"We see an example of that with the austerity moves in Europe. Some economists are really concerned we're turning off the engine that is likely to get countries out of the difficulties that they're in."
Retirement Commissioner Diana Crossan is sceptical about estimates of future pension costs so far into the future, as she says it's not possible to be that sure of what will happen in 60 or 70 years time.
Deal with present challenges first - Key
Prime Minister John Key says he wants to focus on problems facing New Zealand now in preference to the future costs of superannuation.
Mr Key says the Financial Services Council report is looking far into the future.
"It's talking about what the consequences are in 2080 and today happens to be 2012. Even the Retirement Commissioner basically says you don't have to do much until 2020.
"As a Government we have an enormous number of problems which are in the here and now, and we're dealing with those at the moment."
Labour's finance spokesman David Parker says the Prime Minister's ego is getting in the way of making vital decisions on superannuation.
"It's obvious to everyone else that for superannuation to be sustainable into the future we have to raise the age of entitlement."
The Labour Party wants the age of eligibility for superannuation to increase to 67.
Mr Shearer says today's young people are going to be supporting a very large group of older people collecting superannuation. He says if super continues as it is, the young may have to forgo public education or health that people in his generation have had the benefits of all their lives.
Superannuation analyst Jonathan Eriksen thinks the age should be raised to 70, over a 20-year period. "The longer we hold off the harder it is going to be for the next generation to adjust to the changes."
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