9 Oct 2013

NZers will increasingly rely on private savings in retirement

6:53 pm on 9 October 2013

The latest report on retirement savings says New Zealanders are going to have to increasingly rely on private savings, such as Kiwisaver, in the future.

The report, released by the Commission for Financial Literacy and Retirement Income, looks at whether current policies will provide people with an adequate retirement income.

It reiterates past warnings that New Zealand is entering a period of unprecedented demographic change.

It's estimated that as the ageing population retires, the cost of superannuation will double by 2060.

Steven Joyce.

Steven Joyce. Photo: RNZ

The Economic Development Minister, Steven Joyce, reacted by saying that the nation's superannuation system was affordable and no changes needed to be made.

Mr Joyce said the superannuation scheme was affordable out to 2060, but Opposition parties claimed that it wasn't affordable because they would rather spend elsewhere the money Government was contributing to the scheme.

But the independent Retirement Commissioner, Diane Maxwell, said the system needed to be fair to those who are approaching retirement, as well as for younger generations.

"A number of people in their teens and 20s think there won't be Super around when they're older.

"We've been saying that actually there will be. I think New Zealanders believe in New Zealand Super. They believe that it is fair. The question is how do you make it sustainable?"

The report said there was still a strong case for a universal, flat rate superannuation payment.

But it recommended reviewing the rate and age of eligibility on an ongoing basis, in response to rising costs of living, and longer life expectancy.

The report said that at the moment superannuation payments were enough for a very basic lifestyle.

But it estimated if people wanted to live more comfortably, each individual should look at saving between $205,000 and $400,000 before retirement.

Low wages still a worry

The Green Party said any superannuation policy had to take into account that people who earn low wages were going to struggle to save a reasonable amount for their retirement.

The Greens co-leader, Metiria Turei said the party's still working on its policy.

But she saids compulsory Kiwisaver would only work if wages were significantly higher.

Ms Turei said thousands of workers would be unable to build up a decent-sized Kiwisaver because they're earning so little.

'A missed opportunity'

United Future leader Peter Dunne said the latest report on retirement savings is a missed opportunity.

He said it did nothing to break the political deadlock and address the need to do something about the age of entitlement.

"Both the Labour Party and the National Party have got to work out a way around this 67 versus 65 problem.

"Our flexi Super approach provides a way of giving people a bit more stability and a bit more choice over their long-term.

"And also creating a bit of a level playing field whereby these longer term decisions can be made without that political imperative of this age or that age."