Labour plumps for compulsory super, retirement at 67

Thursday 27th October 2011

A Labour-led government would raise the age of pension entitlement to 67 and introduce compulsory KiwiSaver superannuation savings, the party’s leader, Phil Goff, announced today in the first major policy release of the election campaign.

With one day short of a month before polling day on Nov. 26, Labour is gambling its compulsion policy will be popular, and that a plan for progressively raising the retirement age to 67 over 12 years, starting in 2020, will be viewed as realistic by the generation that will be retiring by then.

Labour would also immediately resume contributions to the New Zealand Superannuation Fund. The National-led government suspended its contributions in the wake of the global financial crisis, arguing that it made no sense to borrow money for savings.

Prime Minister John Key has also pledged to resign rather than lead a government that raises the age of entitlement to the state-funded pension from 65, while also indicating there was plenty of time to make adjustments to a scheme that threatens unaffordability because of New Zealand’s aging population.

However, Goff said it was important to act now.

“If we don’t our children and grandchildren will be forced to pick up our bill,” he said. “We must have the courage to make the hard decisions to secure a prosperous long-term future for all New Zealanders.”

On raising the retirement age, Goff said “by 2050, the number of people aged 65 and over will double to 1.35 million. Our bill for superannuation will also double, so it’s vital we plan for our rapidly aging population now.”

By phasing the change in over 12 years between 2020 and 2033, the Labour plan means “no-one currently aged 55 and over will be affected by the change,” said Goff. “For those aged 45-55, the age of eligibility will rise by two months a year, and for people 45 and under, they’ll be retiring at 67.”

Goff indicated some acceptance of the government’s thinking on resumption of NZ Super Funds, with plans to start with annual payments of $750 million in 2012/13, rising to around $2.4 billion a year by 2016.

The compulsory KiwiSaver scheme hits employers in the pocket, by raising contributions by half a percentage point a year from 3 percent in 2014 to 7 percent in 2022, while employee contributions will remain unchanged at 2 percent.

The government would smooth its own costs of compulsory KiwiSaver by phasing in the $1000 kick-start for all members at $200 a year for the first five years.

KiwiSaver members will still be able to access their funds when they turn 65.

BusinessDesk.co.nz

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