The Retirement Commissioner has told Parliament's Economic Development, Science and Innovation Committee (EDSIC) there’s a “crucial need” for all political parties to support a stable retirement policy.
Jane Wrightson appeared at an EDSIC meeting on Thursday for a briefing on the 2022/23 annual review of the Retirement Commissioner. Wrightson told the select committee a “long-term view” is needed when it comes to retirement.
“Nationwide, the retirement income system, education, savings, financial capability and pensions are interlinked. So taking a holistic and long term view is crucial for our people,” she said.
“Put simply, tinkering with only one part of the system doesn't serve retirees and future retirees well. Taking a systemic approach means the reasons for change and indeed status quo are looked at together to achieve the best outcomes for New Zealanders.”
Wrightson has held the Retirement Commissioner role since early 2020 and is currently in her second term as Retirement Commissioner which expires in early 2026.
During her speech to the committee, Wrightson said the key recommendation from the 2022/23 annual review was to keep the age for New Zealand Superannuation – the NZ super – at 65.
“Our modeling shows that if there's to be any change considered, this has got to be accompanied by a suite of other actions, particularly looking at the inequity this would cause and mitigations to compensate,” she said.
Wrightson added that NZ has the eighth lowest pension cost in the OECD (which has 38 countries as members) and NZ was in the lowest quartile for expenditure.
“What we can see from our reviews across the years is that to really make change requires long term policy thinking, which is generally beyond election cycles,” she said.
“Ideally, I'd like to see cross party accord so we can get parties to broadly agree on policy approaches for future retirees.”
When it came to questions from the committee, EDSIC committee chair Parmjeet Parmar was particularly focused on the subject of pension age.
Parmar was a National MP from 2014 to 2020 but didn’t make it back into Parliament during the 2020 election. However, she got back into Parliament in the 2023 election after she left National and joined the Act Party.
Parmar wanted Wrightson to confirm the Commission’s current view that the pension age of 65 shouldn’t be changed was not a “flip flop”.
This was because the two previous Retirement Commissioners – Diane Maxwell and Diana Crossan – had called for the pension age to be pushed up from the age of 65 to 67.
Wrightson said it wasn’t a flip flop and the Commission had looked at new evidence which included environmental change and looking deeper into more systemic issues around women as well as Māori, Pasifika and single people.
Parmar still wanted to know what the advantages of increasing super could be and Wrightson replied that there were “no advantages other than a fiscal advantage”.
“If the country is going broke, then perhaps it's an option,” she said but added that it was about choices in government expenditure.
Wrightson also pointed out that Australia could afford to means test – Australia’s pensions are means tested whereas NZ Super is universal – and also raise the pension age to 67 because Australia has a “particularly robust” private savings scheme that is much more robust than NZ’s.
According to the Retirement Commission, the current rate of people over the age of 65 that still work sits at 24%, which is much higher than other countries. In Australia, that stat is at a much lower 12% and in the UK it's 10%.
Order, order
Two Labour MPs — Helen White and Willie Jackson – got told off by Parmar during Thursday’s select committee.
When White interrupted a reply Wrightson was giving to one of Parmar’s questions, Parmar twice reminded White she was chairing the meeting, following that up with: “Helen White, I call you to order”.
Midway through the meeting, Parmar interrupted Jackson to ask where his question was after Jackson congratulated Wrightson on recommending that the retirement age stays at 65 before getting to his question.
Jackson wanted to know if the Commission had taken discussion that has cropped up over the years around if instead of being raised, the NZ retirement age should be lowered to 60.
“Māori are always saying we’re dying too early and we don’t want it [the retirement age] increased, we want it dropped,” he said. “That was one view from Māori.”
Wrightson said the Commission had done a deep dive into women as well as Māori in the Commission’s last review and that view came through “very clearly”.
“And that exemplifies why just saying, 'put the age up, we'll solve the fiscal problems and it will all be fabulous' is not the right approach. It is much more complex than it looks. The impact on Māori is disproportionate,” she said.
Jackson also wanted to know – like every person does – how much New Zealanders need in the bank now when they reach retirement age.
Wrightson replied that there were lots of variables but the answer is “definitely six figures” – seven figures for those who wish to have a “very comfortable” lifestyle.
She said the point of NZ Super as well as private savings were to try and “mirror” the standard of living people had before retirement.
“And so the amount of private savings then becomes quite crucial about whether you can mirror that, because NZ super will give you the baseline,” Wrightson said.
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"Jackson also wanted to know – like every person does – how much New Zealanders need in the bank now when they reach retirement age. Wrightson replied that there were lots of variables but the answer is “definitely six figures” – seven figures for those who wish to have a “very comfortable” lifestyle."
"in the bank" means assets that can easily be converted into cash? I assume that one's dwelling is unencumbered.
So in other words, totally out of reach for millennials who will spend almost all of their careers (if not more) paying off mortgages.
Working until 70 appears to be the way to go. Might get five years of not working after I stop before I finally die, but at this rate it's all I'll be able to afford.
So in other words, move away from friends, family and support networks, as well as places that readily accessible medical care?
Yes that sounds like a retirement worth spending another 35 years working towards. A short one, but apparently the answer is always "lower your expectations, move further out" no matter what age you are as a milennial.
Well, it's better than moving to Australia, which is what everyone in these comments is constantly saying that they want to do.
Besides, you can make new friends and still visit old friends (and family) without travelling overseas.
I know it sux that we can't afford to buy where we want to if we want to retire early. There is not much we can do to change NZ's house prices. What we can change though is the choice of where we buy. Bottom line is that the scenario you've described doesn't have the be the one you choose. if you want to retire earlier with your own house and some investment properties (and broaden your circle of friends) you can still do so in NZ, but of course it'll require making some sacrifices.
Thing called modern technology. Still beats spending two three hours a day in traffic. Are you saying that you can't make more friends. My wife left England almost 40 yrs ago leaving family and friends you know back before you had FB what's app. Never saw mother/father and two sisters again. When flights cost an arm and leg when ph calls were only made at Xmas and all you got was an echo and paid 20 dollars for 10 min. But she cane here for a better life. You want something out of life it's called sacrifice
Yea, I think you'll find millennials have things like houses, families, kids and careers now. We know plenty about sacrifice already, chief - we've had to work harder for those things than our parents did.
We're established, and for some of us, moving isn't much of an option are thanks to VISA and travel restrictions previous generations didn't have to deal with. And rather than accept that there might be a wider problem when people can't afford to retire - mostly because someone else blew out housing prices and tanked affordability - the suggestion is "just go somewhere else then"?
No one wants your unsolicited paternalistic lectures anymore. We're too busy picking up the pieces.
You know it's funny because on the recent articles about WFH, there were comments suggesting people should stop living "further out" if they don't like the idea of commuting into the office. But then you'll be labelled entitled if you spend over $1m to live closer to work.
Source...link...fake?
"While there's no set retirement age in Australia, the Age Pension age is currently 67.
The starting age for the Age Pension has gradually increased since 2017. Although the government currently has no plans in place to raise it further, there's no guarantee it will remain the same."
https://www.australianretirementtrust.com.au/learn/education-hub/retire….
It's probably too much of a general question. It doesn't take into account many variables. Is that person who needs seven figures single or married? Do they own a mortgage free house? I imagine the seven figures would include investment properties, shares, crypto, gold and cash.
A general rule of thumb would be for a superannuant to have a mortgage free house plus 500K of other assets as a reasonable baseline to eke out an existence. A couple, both receiving superannuation, would find it a bit easier.
He’s correct to an extent. I remember my grandparents harping on about people wasting money on booze etc, but they always had the latest gadgets, often paying top dollar as soon as it came out. A fun life seems a better use of money than non essential stuff that only depreciates.
Zwifter, a single person with a mortgage free house and a further 500K of assets would need to be careful. They would only be getting almost $500 a week in super which will need to cover a lot of things. The 500K of assets may or may not provide good additional returns. If in TDs interest rates are rather fickle. Good at the moment but what about down the track? The 500K really needs to be in inflation proof assets (TDs are not) but those don't necessarily provide a great passive income all of the time.
4% rule would give you an extra ~$400 a week from the 500k, which assumes you don't mind running down your capital as you age. Also a non-zero chance of running out entirely. Plus, this relies on a diverse stock+bond+? type portfolio, just using TDs will see either very low income or inflation taking big chunks out of your future income.
3% rule would be more conservative, ~$300 a week. Up to the individual how much they think they can live on.
I am not sure we are talking about the same things.
the key to retirement finances is managing income streams, be that from super, savings, PIE funds, IPs, rentals, dividends, or even children.
I leave the moral debate to ones who can afford to talk about incomes.
They go hand-in-hand though because the income issue can be solved by downsizing out of the 4-5 bedroom family homes that many of them are white-knuckle holding onto forever. Ironically, speaking of incomes, that would release hundred-of-thousands of dollars that they could never of dreamed of actually earning in paid employment in their careers.
Also solves the problem of the the rates bill on their too-big home that they spend every waking moment whinging about.
I know many people that pretty much live off NZ super alone (they have their own house). Add 30k a year and you should be able to live fairly well. After 75 you won't be doing much, so cut that down to 15k a year. So if you live to 90 you only need $525k. Many could do that just by downsizing / moving.
I think people get too fixated on saving for retirement and not spending money while they are young enough to enjoy it!
I agree, but this is only as long as NZ Super payments don't shrink in the future. Without NZ super providing at least the same base amount as now (non means-tested helps), spending only 20k (especially eating into only 10k of that) per year will be impossible. Fingers crossed Super will still pay a decent base income by the time many of today's millennials will retire.
"Wrightson added that NZ has the eighth lowest pension cost in the OECD (which has 38 countries as members) and NZ was in the lowest quartile for expenditure."
A fact never mentioned by the multitudes of NZSuper naysayers
I have a debt free home & my personal budget is the NZSuper single living alone rate just over $500/wk. This is just enough without funding overseas holidays, new vehicles and expensive hobbies or addictions. A few years ago my late wife and I managed quite a bit easier together on the couples rate ~$800/wk
Wrightson added that NZ has the eighth lowest pension cost in the OECD (which has 38 countries as members) and NZ was in the lowest quartile for expenditure.
And in terms of our overall government debt, we're around the same place? So all this is proving is that we run a much smaller than average fiscal policy, and much higher than average private debt scheme, used mostly to tick up the cost of houses that already exist. What would be a more useful stat would be portion of fiscal policy attributed to pension. Or pension as a portion of overall welfare benefit spend.
For super naysayers, it's generally the fact that more is spent on super than on education, essential services or healthcare (excluding retiree care) that's the kicker. And while there are children whose grades are slipping, teachers who cannot afford to live here, police who are leaving, patients waiting in waiting rooms for a half a day, critically injured patients waiting hours for ambulances because there simply are not enough drivers... while all that is happening, our current level of overall super spend and lack of appropriate tax is shameful. A government advocating to spend less is abysmal, and one who spends what should be enough to pull us out but too much on vanity projects is just as bad.
IMO - We're not coming out of this one as pretty as post GFC.
He noted that New Zealand “has the highest basic pension paid out of general taxation relative to gross earnings in OECD countries”
Its simple.
If you work 215 hours per week, and save 217% of your take home pay each time, you will be able to quit work at 87 and live a comfortable life for a good 2-3 weeks. Maybe even a whole month if in good health and in your own mortgage free house.
#workforlife our GDP needs it.
I find FIRE Theory is not really that useful for most, it fails to factor in many very common changes such as Relationship status, health, dependents, unepected costs, etc.... and most FIRE experts tend to just sell advice, rather than stop working.
The only valid component is spend less than you earn.The problem we have now is for many the spend is at best equal and often more than the earn. This is compounded by the fact that the spend increases by more than the earn each year.
3% may not be much, but look at the stats, removing 10% from peoples salary and for the 60-70% that already exist pay to pay, they will be in immediate debt.
The issue with the savings, is not the amount, but the ability.
I've found FIRE thinking pretty useful. It's not so much the estimates of sustainable drawdown, be it 3 or 4%, it's the understanding that you need a period of your life where you manage your cash flow to create the capital needed to sustain you later. I spent 10 years ( unfortunately the last 10 years) of my working life doing that, and the last 10 years since full retirement benefitting, drawing about 2%, which even in current pretty constrained markets, allows investments to keep pace with inflation.
If the worst happens, and we live to 100, we should be OK.
I’d argue retiring at 65 is retiring early!
A couple paying 3% into KiwiSaver over 40 years will end up with enough to supplement NZ super probably, assuming they also own a house. That is assuming NZ super still exists.
Yes the conservative fund default is crazy.
I will fix it for you. Maori can fuck off if they are so entitled they think they should get super early because there is some myth that they die younger than anyone else. They can fuck off, just like anyone else that thinks that they can change the rules for others as a result of their lack of planning, lack of exercise, lack of education, or poor life choices. It that still racist, or just mean ? What I think you will find is that there are a small number of (increasingly noisy) people in the population (and it does not matter if they are Maori or not), who are mainly stupid or lazy (or both) and are fast coming to the realization that pissing their life up against the wall was not a flash idea and they want their mistakes to be paid for in retirement at the expense of others.
It occurs to me, with talk of different ethnic groups having different retirement ages, that there could be many criteria for when one should be eligible for superannuation. Health status, blue collar worker or white collar worker (China has this), gender, LGBTQQIAAP+ (Copilot helped me with that), and possibly more.
I'm under some pressure from management and colleagues to delay my retirement until I turn 67. This is due to still being effective, mentally sharp, a full head of hair and teeth, on no medication, good eyesight and having the physique of an older Michelangelo's David. I attribute this to being on a meat based diet although I was a slow to mature, as if I have a different clock. It just seems an odd thing for me to retire and I suspect I will feel guilty about it. Even folk from the same background will have different biological ages. Perhaps retirement eligibility should require a medical examination and a certificate.
That said, I am sympathetic to the idea of a lower retirement age for Maori and Pacific people, much like some medical and education interventions have ethnicity criteria. These groups have health and economic outcomes that have been adversely impacted by historical events.
Unfortunately, ethnicity can be difficult and controversial to define. It can lead to abuse of the system. People can quite easily fake disability to get early retirement already. Maybe we should just keep it simple and have a precise age for all people? Keep it "universal".
Do we even have a scientific definition of "Maori" (other than the drop of blood and a wish that is widely accepted)? Is there a test that can identify an individual as "Maori" (as opposed to being a Cook Islander or a Rarotongan)? Is it fair for someone with 1/32nd Maori ancestry to claim early access to National Superannuation solely on that fraction of heritage?
Out of reach for a large number of people , and when you throw numbers like this at them and they are struggling to put food on the table they won't even try. How about this experts get out and offer some constructive conversation rather than putting the S**ts up people.
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