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Big Questions of 2013 Retirement Income Policy

Big Questions of 2013 Retirement 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

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Big Questions of 2013 Retirement Income Policy

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  1. Big Questions of 2013Retirement Income Policy Dr Malcolm Menzies Research Manager Commission for Financial Literacy and Retirement Income

  2. 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

  3. 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

  4. Six pillars • NZS • KiwiSaver • Private savings • Home ownership • Employment • Other public services, especially health • Plus family/community support

  5. 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

  6. 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?

  7. 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

  8. How do we make sure things are fair across generations?

  9. 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

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