The Retirement Commissioner Diane Maxwell has released her recommendations for changes to New Zealand Super as part of her 2016 review of retirement income policies.

The proposals include increasing the length of time that people need to live in New Zealand in order to qualify, as well as a gradual increase in the age of eligibility for NZ Super.

“We know these are difficult conversations, but we also know that people are living longer and receiving NZ Super for a longer time. If we do nothing soon then we are putting off more painful decisions that will have to be made in the future,” says Maxwell, “If changes are agreed now then there is time to introduce them in a way that allows people to plan and prepare.”

Maxwell says any changes need to be part of a broader approach, reflecting the fact that people reach their 50s and 60s with varying degrees of physical and financial fitness.

“We heard from 65-year-olds who planned to retire between 68-72 and 58-year-olds who were unable to work. 65 is too late for some and too early for others.”

The recommendations have been presented by four new ‘Toys talk retirement’ interactive videos. In the latest video, Batman tackles the question of who should get NZ Super. The Commission chose this approach, instead of a traditional printed report, to encourage all New Zealanders to take a look and get involved in the conversation about the future and the decisions that need to be made.

The short videos, featuring Ken, Barbie and an array of superheroes, contain interactive hotspots that link to 226 pieces of research, submissions, survey results, podcasts and videos, which form the backbone of the work that led to the recommendations.

The recommendations for NZ Super are:

  • Increasing the age of eligibility to 67 years, with a gradual rise over eight years starting in 2027, to reach 67 in 2034.
  • Increasing the length of residence criteria from 10 to 25 years.
  • Removing the non-qualifying partner option, so that people who are younger than 65 or who don’t meet the residence requirement can no longer receive NZ Super through their 65+ partner.
  • Reforming the direct deductions policy for overseas state pensions so that partners are not affected and voluntary contributions to overseas state pensions are not deducted from NZ Super.
  • Reviewing and adjusting supplementary allowances.

Why change is needed

  • The number of people aged 65 and over will double in the next 30 years to 1.4 million.
  • The net actual cost of NZ Super is expected to triple in the next 20 years from $11b to $36b. It is projected to reach $56b ten years after that and $90b by 2056.
  • NZ’s dependency ratios are declining: for every person aged 65+ there are currently 4.4 people aged 15-64 years. In 2035 that number is expected to drop to 2.8 for every person aged 65+.
  • Over the past century, average life expectancy has increased by 20 years. From 1980-82 the average number of years that people lived beyond 65 was 13.3 for men and 17.1 for women. From 2013-15 it was 19.1 and 21.4 respectively and it continues to climb.
  • Residency criteria for NZ Super: people become eligible if they have lived here for 10 years after the age of 20, including five after the age of 50.
  • This is the lowest in the OECD, where the average residence requirement to receive minimum benefits is 26 years.
  • When the Old Age Pension was first introduced in 1898 the residency test was 25 years and was later reduced to 20 years in 1938 and then 10 years in 1977.
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