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Many New Zealanders have different ideas about what the New Zealand retirement income system is for, but Retirement Commissioner Jane Wrightson says getting a clear definition is an important part of evaluating any future changes.
The New Zealand retirement system is made up of two parts: New Zealand retirement, or pension, and KiwiSaver.
But Wrightson said that, until now, there has been no agreed definition of what the system should achieve. There was no definition of NZ Super in the relevant laws.
“During the Retirement Income Policy Review last year, it was clear that New Zealanders had strong views on the role of NZ Super, but they differed,” he said. “Some saw it as there to prevent poverty and ensure people maintain dignity in old age, others saw it as a basic standard of living, as a gesture of caring for the elderly, or as a reward for working hard and paying taxes. .
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“My role as Retirement Commissioner requires me to oversee and advise the Government on retirement income issues, but for that I need to start from a foundation of what our retirement income system is for.”
Wrightson formed an Expert Advisory Group of academics and policy specialists to help her test and debate problems.
He said that if the country analyzed retirement income policies in depth in the coming years, “and you cannot think that it will not be post-Covid,” the first thing that would be needed would be a framework against which proposals could be examined.
The panel had decided that “a stable retirement income framework allows for the confidence and assurance that older New Zealand residents can live with dignity and manna, participate and contribute to society, and enjoy a high level of belonging and connection with their whānau, community and country ”.
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The pension is a practically universal payment for those over 65 years of age.
New Zealand Super would have to ensure an adequate standard of living for New Zealanders of eligible age and would be the government’s main contribution to financial security for the rest of a person’s life. The Government was also intended to support New Zealanders in generating and managing independent savings that contribute to their ability to maintain their own relative standard of living.
“This statement recognizes the dual role of the government and the individual in preparing for your retirement,” Wrightson said.
“The review recommended that NZ Super remain in its current configuration over the medium term, and made a number of recommendations to strengthen KiwiSaver. Whether people use KiwiSaver or another vehicle to generate independent savings, they should be supported to save money for retirement because for many, NZ Super alone will not be enough. “
Some people thought the pension was a reward for having paid taxes for a lifetime, but it was also available to people who had not had a paid job for part or most of their lives, he said.
Wrightson said that policies in areas such as healthcare and housing must also be viewed through a retirement lens, as they have a significant influence on living standards during retirement.
“This is particularly true for many Maori, whose disparity in living standards throughout their lives affects their quality of life as they age,” he said. “I hope to influence progress to address these disparities before people retire.”
This year’s Mercer Global Pension Index showed that New Zealand’s retirement income system had slipped down the rankings, from eighth to tenth.
Wrightson said that may sound worrying, but the country was still in the “B team.” Only the Netherlands and Denmark got an A grade. The international comparison helped provide an opportunity to stop and think about the findings, he said.
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Retirement Commissioner Jane Wrightson said she was surprised that there was no clear definition of what New Zealand’s retirement income system is intended to do.
New Zealand achieved an index value of 68.3 overall, 63.8 for adequacy, 62.9 for sustainability and 82.9 for integrity. The downgrade to the 2019 overall rating of 70.1 was primarily due to reductions in net replacement rates published by the OECD.
Mercer New Zealand CEO Martin Lewington said that “sustainability has traditionally disappointed New Zealand’s retirement system, however adequacy was downgraded this year as well.”
“Although it is still above average overall with a B rating, from an adequacy and sustainability perspective our retirement system has fallen to a C + rating. It is disappointing that our ratings here have regressed and as an industry creating the best outcomes for New Zealand retirees is now more important than ever.
“Changes can be made to increase our rating, however as we enter a challenging economic environment, increasing the level of KiwiSaver contributions and focusing more on revenue streams rather than lump sums becomes more difficult to achieve. Growing gender inequality is also a concern and something the system must address. This further highlights the importance of investing in responsibly invested funds that help address gender issues as part of your environmental, social and governance (ESG) policies. “
Wrightson said it was important that, with only two tiers of the retirement income system, the country focused on making sure they were fit for purpose.
