10 Key Pre-Funding Questions answered
Retirement Commissioner Colin Blair answers 10 crucial questions about prefunding NZ Super.
Wednesday, October 11th 2000, 12:00AM
There are two points I’d like to make:
- I commend the Government for releasing its proposal for discussion, and I encourage people to take an interest in this very important issue.
- As Retirement Commissioner, it is important to me that people understand that today’s announcement doesn’t propose any changes to the amount of New Zealand Superannuation entitlement. It simply provides for its future funding. So it is still important that individuals assess for themselves the amount of income they think they will want to have in retirement, and if NZ Super doesn’t meet that need, then people will still need to make their own private provision to make up the difference.
- What effect do you see the pre-funding proposal have on people’s savings behaviour?
Dr Cullen has made it clear that today’s announcement is just part of a package of measures to address the superannuation issue. He has explained that he will also be looking at options for improving the incentives for people to make their own savings.
In the meantime, today’s announcement doesn’t change the fact that NZ Superannuation is intended to provide a basic universal pension to people in retirement. Individuals need to assess for themselves whether that’s a sufficient amount to meet their retirement lifestyle expectations, and if it isn’t, they will need to look to their own efforts to meet their retirement income requirements.
- What is the future cost of NZ Super going to be?
- Is NZS enough to live on?
- How many people are currently saving for retirement?
- So do you think the policy Dr Cullen has announced averts the need for political consensus on superannuation?
- What role does the Retirement Commissioner have in relation to this policy proposal?
- If it is adopted, do you see this proposal as the ‘definitive last word’ on superannuation?
- Is this proposal affordable?
- How much is NZ Super worth today?
Currently NZS accounts for about 4% of GDP, and this is projected to rise to 9% by 2050.
That’s for people to decide for themselves. For some it may be, and for others it may not. There is a survey being managed out of the Ministry of Social Policy that is looking at the living standards of older people in retirement. But essentially it is for individuals to decide whether or not NZ Super will meet their retirement income needs or not, and make their own provision accordingly.
Independent research conducted on our behalf shows that around 64% of pre-retired adult New Zealanders say they or someone on their behalf are currently making private provision for retirement.
I think this is a good opportunity for there to be robust debate on the issue. And I encourage all New Zealanders to listen carefully to the discussion to understand the proposal’s merits in terms of providing long-term certainty for future generations in retirement.
In a survey conducted in late 1999, 89% of adult New Zealanders said they would like to see political consensus on the future of government superannuation. I think that statistic speaks for itself. If today’s announcement generates some multi-party discussion, that can only be positive, surely.
I think it’s important for the Retirement Commissioner to encourage people to listen to the discussion and debate – this is an issue that affects all New Zealanders, not just those already retired or close to retirement.
I also think it is vital that my Office continues to help ensure New Zealanders understand that private provision is still important. Those who want a better-than-basic retirement income need to make sure they are making financial provision for themselves.
That is the problem with retirement income policy - the timeframe for people’s planning is 40 – 50 years so despite best intentions, nobody can accurately anticipate what may happen to policies in the future. That’s why people have to continually review their financial plans for retirement throughout their adult lives to ensure that their plans are appropriate in the context of the policy of the day.
This is a central question that we encourage people to ask in the debate. People will consider the issue of affordability according to their attitudes and opinions about how Government should prioritise its spending.
A married couple (who both qualify) get $347 a week or $18,092 a year (after tax).
A single person (living alone) gets $225 a week or $11,760 a year (after tax).
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