National’s “head in the sand/ trust us we know what we are doing” approach to retirement savings came under attack from a wide range of sources over the past few days.
It started with a release from the Financial Services Council (FSC) last weekend. This highlighted that Kiwis are living longer meaning more and more New Zealanders will have to fund 30 to 40 years of retirement, rather than the 10 to 20 years that retirees used to budget on. This means an increasing potential for some future superannuitants to outlive their savings and of course longer life expectancy increases the potential liability for the Government’s NZ Super Scheme. The FSC estimated that “tax rates will need to rise by 28% later this century to continue funding NZ Super at 65”.
The FSC report was reinforced by a similar theme from the OECD which noted that increases in retirement ages are underway or planned in 28 out of 34 OECD countries. For most of these countries the increases are still not expected to keep pace with improved life expectancy. The OECD’s core recommendation is that “Governments should thus consider formally linking retirement ages to life expectancy and that “bold action is required” in this area.
New Zealand is therefore very much in the minority in the developed world in not moving the retirement age at all.
But this approach is coming under increasing fire with Editorials in the Herald today and the Dominion Post yesterday suggesting that the Government cannot keep brushing aside the concerns on the rapidly rising cost of superannuation. Both editorials felt that National’s policy stance in this area is unsustainable.
Just yesterday it was pleasing to see Labour and the Greens opening the door for a super accord with National, thereby potentially making any increase in retirement age a non-political issue. I have been calling for such an accord for a while now and it is a way for National to get out of the retirement hole they keep digging for themselves and the country.
Two separate surveys by the ASB and ANZ banks out yesterday reinforce that New Zealanders are becoming increasingly concerned that they may not be saving enough to meet the income levels they would like to retire on. So public awareness and concern is rising on this issue.
I wonder if the public perception and media pressure that caused National to u-turn on their recent education policy initiative may also force them to the table with Labour and the Greens to try to resolve the retirement savings issue – I certainly hope so.