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Pension could be linked to life expectancy

A Treasury paper on the long-term outlook for government spending floats the idea of adjusting superannuation payments to reflect life expectancy.

Thursday, October 5th 2006, 6:33AM

by Rob Hosking

The paper canvasses the longer-term trends in overall spending. The big ones, as expected, are health and superannuation.

On superannuation, the paper notes recent work by the Turner Commission in the United Kingdom, which suggests linking superannuation to life expectancy.

At the time pensions were first introduced in New Zealand in the 1890s, the life expectancy for non-Maori males at the age of 65 was 13.08 years and 14.73 for non-Maori females. By 2005, the life expectancy for non-Maori males aged 65 had risen to 17.4 years and, and for anon-Maori female to 20.39 years.

The commission proposed that, in future, a third of any increase in life expectancy should be taken in employment, and two thirds of it in retirement.

Based on this, the British government earlier this year announced the state pension would age would increase to 66 in 2024, to 67 in 2034 and 68 in 2044, with two years to phase in each rise.

Those small incremental changes will have a considerable impact on the burden on taxpayers, the Treasury report says.

The report is not government policy and the current government has no plans to change the official retirement age.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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