Mercer questions sustainability of NZ pension scheme

New Zealand’s pension system has been rated B- and placed eighth in the world in a new index, with a warning that it’s not sustainable.

Monday, October 21st 2019, 6:00AM

The 2019 Melbourne Mercer Global Pension Index compared 37 retirement systems.

In New Zealand, it looked at the NZ Super, voluntary private pensions and KiwiSaver.

The Netherlands had the highest index value (81.0), and has consistently held first or second position for 10 out of the past 11 MMGPI reports. Thailand had the lowest index value (39.4).

New Zealand rated 70.1.

The report found there was a relationship between pension assets and household debt.

As pension assets increased in a country, people felt wealthier and were therefore likely to borrow more.

Author David Knox said having pension funds made people feel more financially secure.

“As the wealth of an individual grows, whether it be in home ownership, investment portfolios or their retirement savings, so does their comfort with amassing debt. The evidence suggests on a global basis, for every extra dollar a person has in pension assets, their net household debt rises by just under 50 cents.”

Mercer New Zealand chief executive Martin Lewington said the sustainability of the New Zealand system was letting it down.

“While still above average, our retirement system has achieved a C+ grade for sustainability. Clearly more needs to be done to address this so that we can have a retirement system that is fit for the future,” he said.

“Our index value can be improved by raising the level of KiwiSaver contributions, placing more focus on income streams in the place of lump sums, and continuing to expand KiwiSaver’s coverage. We have shared some of these views in our recent KiwiSaver submission to the Ministry of Business, Innovation and Employment.”

Tags: KiwiSaver Mercer private pensions superannuation Sustainability

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