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NZ’s retirement savings elephant in the room

Media Release
Friday 30th October, 2009

NZ’s retirement savings a political elephant in the room: Mercer responds to Treasury report

Yesterday's report - 'Challenges and Choices - New Zealand's long-term fiscal statement' - from Treasury rightly puts the spotlight on the issue of retirement income policy in New Zealand and Mercer is encouraging further debate around the issue, which has become the political elephant in the room in New Zealand.

“At present there seems to be a lack of political appetite in New Zealand to really engage on retirement savings, but it’s been widely recognized the world over that the pending pension crisis in years to come will dwarf the current global credit crisis in both severity and spread,” said Mr Paul Newfield, Mercer's, New Zealand Retirement, Risk and Finance business leader.

“We have to be seriously reviewing areas of policy such as NZ Super’s eligibility age, whether NZ Super should be income or asset tested (targeted super) and the need to build and encourage a savings framework based on the provisions within KiwiSaver.

“We do not believe the pending issues will solve themselves. While some suggestions may be politically unpalatable – we encourage the government and all New Zealanders to engage in this critical area, and the sooner the better,” said Mr Newfield.

Mercer’s recent ‘Securing Retirement Incomes – Time to act’ report, released in July 2009, discussed many of the same issues raised by Treasury, including reviewing the NZ Super eligibility age, ideas around improving KiwiSaver and the need for building a decumulation framework (where members can draw down their savings in a sensible way over their remaining lifetime). Mercer also released a global pension index ranking the adequacy, sustainability, and integrity of retirement income systems of 11 countries around the world, earlier this month.

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“We’re strong advocates of early intervention and planning and agree that planned and incremental change is far more likely to be positive and successful than a drastic reaction that is forced on New Zealand,” said Mr Newfield.

“We could maintain status quo, but if we do another area of spending will suffer or savings will have to be made elsewhere.

“Yesterday’s report from the Treasury confirms what many politicians, academics and thought leaders on retirement savings such as Mercer already know – that much work, discussion and action is needed in New Zealand (and around the world) to build a retirement framework that provides adequate savings but at the same time is a system of integrity which is sustainable over the long term,” he concluded.

ENDS

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