Something will have to change to keep NZ Super
Something will have to change to keep New Zealand Super in the future
Tuesday 7 December 2010
The Retirement Commissioner has recommended changes to New Zealand Superannuation to keep it affordable over the long term and to strengthen the principle of universal individual entitlement.
The recommendations were made in the three-yearly Retirement Income Policy Review, which was tabled in Parliament today.
Ms Crossan said changes were critical to preserve New Zealand Superannuation for the next generation.
“Something will have to change to keep New Zealand Super affordable for the long term. We know that there’s a huge number of baby boomer superannuitants coming, and we can’t keep on ignoring this issue until it’s too late. New Zealand Super is essentially a great scheme and is vital for the wellbeing of older New Zealanders,” she said.
Keeping New Zealand Superannuation affordable
Retirement Commissioner Diana Crossan says the Review’s primary recommendation is a package of two measures starting in 2020 designed to keep New Zealand Superannuation affordable when baby boomers will make up the majority of superannuitants and the costs of New Zealand Superannuation are accelerating.
the age of eligibility
From 2020, begin gradually raising the age of eligibility by 2 months per year, so that it reaches 67 in 2033. In parallel, a transitional means-tested benefit should be introduced for those aged 65 who are unable to financially support themselves.
• Adjust the formula used to
calculate the annual increase
From 2020, adjust the formula by which New Zealand Superannuation’s annual rate adjustment is calculated. The Review recommends that this formula should change so that, each year, the rate adjustment should be the mid-point between the percentage increases in the CPI and in average weekly earnings. The real purchasing power of New Zealand Superannuation would still be protected by ensuring that the annual adjustment is never less than the increase in the CPI.
Strengthening the principle of universal individual entitlement
The Review also stresses the importance of the underlying principle of universal individual entitlement on which New Zealand Superannuation is based. Three recommendations are made to remove specific areas of unfairness in the current system that are all based on a person’s partnership status:
• Remove the
non-qualified partner rate
The Review recommends removing the option of income tested New Zealand Superannuation for people aged under 65, or who don’t meet the residency test, whose partners are superannuitants.
• Equalise the unpartnered and
partnered sharing rates
Currently two different New Zealand Superannuation rates apply for people sharing accommodation – one for those who are partnered and one for those who are unpartnered. The Review recommends that these rates should become the same.
the deduction of a person’s foreign pension from their
partner’s New Zealand Superannuation
The Review recommends an end to the current policy of reducing the value of a person’s New Zealand Superannuation if their partner receives a specific foreign pension that exceeds the value of New Zealand Superannuation.
Ms Crossan said the second set of recommendations was based on the principle of fairness.
“New Zealand Super is the entitlement of every qualifying New Zealander regardless of their income or partnership status. These three recommendations address the areas where that principle is clearly not being applied, and should be addressed,” she said.
The Retirement Commissioner is required by statute to complete a review of retirement income policies every three years.
The full report, which contains 17 recommendations, is available at www.retirement.org.nz.