I’m in favour of lifting the retirement age. Life expectancy continues to rise and is now 80.4 years. A man aged 65 can expect to live on average another 18 years, a woman 20. That’s a hell of a long time to be getting the pension and an enormous cost. Rising the age to 67 would free up $1.5 billion a year to go into education and preventative health.
I’m not saying that if someone is physically or mentally unable to keep working they shouldn’t be allowed to retire. There is already a special early retirement benefit and that would be open to those who need it. But today’s 65 year old is generally in pretty good physical and mental condition. the number of people aged 65 or over who are still working have increased nearly five-fold since 1995, with 93,000 (more than half the 65-70 population) employed. That’s a sure sign that many don’t need to retire so young.
We have to face the reality that the retirement age should rise. Otherwise we are going to be carrying an exponentially growing cost from the combination of the aging population and rising life expectancy – devoting more and more of our wealth to supporting people who otherwise could support themselves.
I would rather we were using that money to support education, R&D, and clean tech. These are vital areas for our future that are being under-invested in while so much money is being taken up in super payments.
All that’s required is for the political parties to have a mature discussion (which won’t happen while John Key is in Parliament), get a public mandate, and follow the model of the 1990s superannuation accord. The retirement age could be lifted gradually, say half a year every two years, from 2012 to reach 67 by 2020. Further incremental increases linked to life expectancy should be legislated for and happen automatically.
On the Retirement Commission’s other suggestion – linking the super rates to inflation, not the average wage – I disagree. What would inevitably happen is the relative value of super compared to wages would decline and old-age poverty, which is virtually eliminated in New Zealand because the super rates are set above the poverty line, would increase.
Of course, this whole issue would be avoided if we had a guaranteed minimum incomes. Couple it with compulsory Kiwisaver and people could choose to retire when they like with the GMI and their Kiwisaver to live on.