Big Questions of 2013Retirement Income Policy Dr Malcolm Menzies Research Manager Commission for Financial Literacy and Retirement Income
Think about it • If we’re lucky, we get old • No-one wants to spend their youth in preparing for old age but • We have to keep our future selves in mind (not to mention other generations) • Old age is better with income
Key features of current system of retirement income • Very simple! • No age of retirement • One tier: NZS (though KiwiSaver is a de facto extra tier) • Universal entitlement at 65 (subject to residency) • Paid from taxation • Indexed to wages • KiwiSaver (who’s a member?) • You take your chances with KiwiSaver
Six pillars • NZS • KiwiSaver • Private savings • Home ownership • Employment • Other public services, especially health • Plus family/community support
Strengths of the current system 1. Income support • NZS provides “no frills” income support for 60% of older (66+) New Zealanders • Fair to women 2. Wellbeing • Low levels of poverty among older New Zealanders (dependent on home ownership and complementary services) 3. Longevity risk pooling • New Zealand Superannuation covers this off
Questions for the current system 4. Lifetime consumption smoothing • Increasing expectations of the baby boomers and beyond 5. Voluntary vs compulsory savings • Increasing need for private top-up to meet expectations • Growth in KiwiSaver. What to do with balances? 6. Citizenship dividend • Determined by values • What is fair?
Key issues 7. Fiscal restraint and investment • The fiscal gap • Increases in longevity (where will they stop?) 8. Cohort self-funding • Trend towards transfer of burden and risk • SAYGO vs PAYGO • Transition • Political sustainability
2013 Review Process • www.cflri.org.nz • Position papers on each of the eight objectives plus one on “sustainability” • Background papers on website from now, by 8 March • Focus groups • Workshop • Written submissions • Response form • Analysis, writing • Report by 30 September