Former National Party leader Don Brash has proposed allowing people to choose to receive a larger pension if they retire later as a way of keeping people in the workforce.In a speech to a conference on asset allocation in Auckland, he said raising the age
Former National Party leader Don Brash has proposed allowing people to choose to receive a larger pension if they retire later as a way of keeping people in the workforce.
In a speech to a conference on asset allocation in Auckland, he said raising the age of eligibility for New Zealand Super from the current 65 may be more politically acceptable if there was flexibility and choice in the system.
"If the age of eligibility were 67, for example, under a policy allowing flexibility regarding the age at which it could be drawn, somebody might choose to take the pension at, say, 65.
"At that younger age, the amount received would be actuarially adjusted downwards, and would remain at that lower level, with regular upward adjustments with wages of course, until death. Conversely, if somebody chose to defer drawing the pension until, say 69 or 70, the amount received would be actuarially adjusted upwards," he said.
Such a system would reduce the cost of New Zealand Super and encourage people to stay in the workforce for longer, he said.
Last year, Australia announced that the age of eligibility for their age pension will be progressively raised to 67. Germany and the United States are also raising the age of eligibility to 67, and the United Kingdom is going for 68. Denmark is targeting 67, and then indexing the age of eligibility to future improvements in life expectancy.
The National Party government led by Jenny Shipley tried to link the pension to inflation until the amount paid to a married couple fell from 65 percent of the average wage to 60 percent.
Dr Brash said that government failed to adequately explain to a suspicious electorate what they were trying to do. They were not helped by a hostile media.
"I well recall an article which appeared in the main Wellington newspaper on the day before New Zealand Super was due to start being linked to the Consumer Price Index rather than to wages: the article hysterically and erroneously claimed that thousands of elderly New Zealanders were about to be thrown into direst poverty, even though of course the real value of New Zealand Super was not going to change at all. It was an outrageously false claim, and I'm surprised the Government didn't take the newspaper to the Press Council."
Dr Brash, who is 69, said most 65 year-olds no longer felt "elderly", or ready for the scrap heap.
Dr Brash, who headed the 2025 Taskforce, said compulsory super would be hugely popular among fund managers and would probably help capital markets but he said it was not a foregone conclusion that it would increase New Zealand's savings rate. The taskforce suggested linking New Zealand Super to the Consumer Price Index, rather than wages.
"If a compulsory scheme were accompanied by any form of fiscal subsidy to 'sweeten the pill', especially for low income people, it would inevitably need to be accompanied by a means testing of New Zealand Super, and that would reduce its political appeal.
He said a compulsory scheme had many drawbacks.
"To me, New Zealand Super is a very good scheme and should be retained. But we do need to face the inevitability -- and in my view it is the inevitability -- of an increase in the age of eligibility."
