Retirement Commissioner Jane Wrightson says the Commission’s annual budget has remained unchanged since 2016 and the Commission will be using its financial reserves over the next four years to run the organisation

The head of the Retirement Commission says the Commission’s finances aren’t sustainable in the long-term.

Retirement Commissioner Jane Wrightson told the Economic Development, Science and Innovation select committee during her annual review on Thursday that the Commission hasn’t had a baseline increase since 2016.

“We’ve been absorbing rising costs for that entire time,” she said.

The topic came up when Labour MP Reuben Davidson asked Wrightson if she was anticipating a need to reduce the Commission’s team based on indications from the Minister, or if there was any money being provided to increase the Commission’s team and work.

The Retirement Commission falls under the responsibility of Commerce and Consumer Affairs Minister Andrew Bayly.

“If you can conjure up that pot of money, I'd be deeply grateful. We've been operating on a planned deficit for the last year or two and we haven't had a baseline increase since 2016,” Wrightson replied.

“We had a $400,000 budget reduction for this financial year as part of the public sector savings plans. And to manage that, we've not replaced two people, which means our insights and outreach space is a bit more compromised than it was.”

The Commission’s annual budget from the Government has been around $8.6 million annually since 2016 and Wrightson doesn’t think there’s “any chance” of a funding increase in the foreseeable future either.

She said the Commission will be able to last another year or two by being “really careful” which will include running by a sinking lid policy and only employing people if they absolutely have to.

However, this won’t be sustainable in the long term, she warned, and at some stage in the near future the Commission will have to “throw our strategy out the window and go much smaller”.

The Commission’s chief operating officer Nick Thomson told MPs at the select committee that the Commission is running about a $690,000 deficit budget for the 2024/2025 financial year which ends 30 June 2025. 

“Then we will use our reserves over the next four years and that’s about approximately $2 million worth of reserves that will be used to run the organisation,” he said.

Wrightson described the $2 million worth of reserves as “banking money”.

“It’s not because we’re rolling in money,” she said.

The Commission reported a deficit of $343,626 in its 2024 financial year which ended 30 June 2024. The Commission’s total expenditure for that 12-month period came to $10.3 million. 

Of that total expenditure figure, $7.7 million was spent on financial capabilities, $2.1 million was spent on retirement income policy and $474,463 was spent on retirement villages.

Two legs

Wrightson reiterated during Thursday’s select committee meeting that she would like to see “cross party accord” so parties could broadly agree on long term and consistent policy approaches for future retirees. 

“There are always tough trade-offs and no one party has the magic bullet,” she said.

The Commission’s latest research shows that a growing number of over 65 are reliant on NZ Super, with 40% having virtually no other income and 20% only having a little more. 

“Even with NZ Super as it stands, only 43% of New Zealanders are confident they will have a financially comfortable retirement. So NZ Super is a taonga to be treasured and shouldn't be seen as a burden,” Wrightson said.

Wrightson described NZ’s financial retirement system having two legs: NZ Super and private savings like KiwiSaver. She said one shouldn’t be changed without mitigating impacts on the other.

She said it was “very clear” that while KiwiSaver had become instrumental in encouraging retirement savings, people under the age of 65 nor their employers are contributing enough to the retirement savings scheme.

Wrightson wants a higher default contribution rate of at least 4% and has said employers should be matching at this level or more. 

“Encouraging private savings is crucial,” Wrightson said on Thursday. “For fiscal reasons, so that fewer pensioners rely on NZ Super alone and seek additional hardship and housing assistance. And societal reasons, so pensioners have enough funds to contribute to society and enjoy their retirement years.”