28 October 2011

Industry Welcomes Proposed Retirement Income Strategy

The Investment Savings and Insurance Association (ISI), whose members manage over 80% of New Zealanders’ KiwiSaver funds, says Labour’s proposed solution to New Zealand’s long term retirement income issues is a very good start.

The Association believes Labour’s announced policy on long term savings is a welcome recognition that the current policy on retirement incomes is not sustainable and needs to change.

ISI CEO Peter Neilson says gradually increasing the age of eligibility to 67, enrolling all employees in a universal superannuation scheme, and moving superannuation contributions to levels similar to those in Australia are in principle positive steps and good for New Zealand.

Mr Neilson says it is time for cross-party discussions to collectively address the long term issues New Zealand faces from an aging population, and to develop a scheme so that savings become the predominant source of income for retirement for the generation now entering the workforce. The Association believes the best time to address this would be in the period immediately following the November general election.

“We need to create a sustainable scheme that provides employees and employers with greater certainty about the future, and removes the risk of successive Governments tinkering with it,” explains Mr Neilson.

“We would certainly agree that, to provide greater security of future retirement income, there needs to be a much greater reliance on savings rather than taxation,” says Mr Neilson. “Not only is our population aging with the baby boomers retiring, we are also living much longer. It is these two factors that mean our current retirement income model, that is largely dependent on tax revenue, is going to be unable to meet future requirements.”

Mr Neilson says that our increasing longevity after 65 means the age of entitlement for national superannuation will probably need to be increased beyond 67 over time.

“A 2009 article written for a UK medical publication, the Lancet, estimates that 50% of people born in highly developed countries after 2000 could live to be 100. If our national age of entitlement remains at 65 or increases slightly to 67, this would mean many people will be spending almost as much time in retirement as they did in employment. Funding retirement using a taxation-based system will not be a sustainable model in these circumstances.”

Visit our website: www.isi.org.nz

ENDS

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