I spent last Thursday at the latest seminar run by Auckland University’s Retirement Policy and Research Centre (the RPRC), “Retirement incomes policy: The future is now” (overview here, full programme here). The Centre also prepared a ‘Summary of issues’ background paper which gives a quick overview of our current system, the policy positions of the political parties, and the issues that look to be live ones.
I came away with the overall impression that there isn’t a lot wrong with our current arrangements, and there is quite a lot right.
As it happens (and I didn’t know because I hadn’t got round to reading it yet), that’s what the latest three-year review of retirement incomes policies from the Retirement Commissioner also said (page 6): “New Zealand has an excellent retirement income framework which achieves good outcomes for the majority of people aged 65 and over. Rates of poverty are relatively low for this group, thanks to a combination of New Zealand Superannuation (NZS), high levels of home ownership and a raft of other government policies and programmes”. It’s not perfect, and there are some challenges – “there are signs that in the near future outcomes may be more unevenly spread, with some people arriving at retirement in poor financial shape while others continue to do well” – but overall it’s in good shape, and we even heard evidence from some of the seminar speakers that other countries are looking to aspects of our system to improve their own.
And as Matthew Bell from Treasury showed us based on Treasury’s long term fiscal projections, it wouldn’t take much of a change to current pension arrangements (eg by progressively raising the entitlement age by some modest amount) to offset whatever demographic pressures are on the regime. It’s also worth having a quick dekko at a paper written by Michael Littlewood, co-director of the RPRC, “New Zealand Superannuation’s real costs – looking to 2060“, which has looked at the various vintages of the Treasury’s long-run projections and found that every time the cost of national super has been re-estimated, it has come out lower than previously thought, as his chart below shows. The ‘net’ cost by the way is the cost of national super less the income tax on pensions that the government gets back.