The purpose of NZ's retirement income system
New Zealand Superannuation is a cornerstone to the retirement income system in New Zealand, and as we often say in our seminars, it is one of the most generous public pension schemes in the western world.
Everyone who is entitled to the income receives the same amount before tax, regardless of how much you have earned, how much you do earn and how many assets you have.
In the 1990's there was a high 'superannuation surcharge' where your New Zealand Superannuation income was abated based on how much wealth you had or how much income you earned. This was removed and politicians have shown little willingness to reintroduce any kind of 'means, asset or income testing'. Another 'tweak' of New Zealand Superannuation are various proposals to increase the age of eligibility - currently age 65 - (as most countries are doing overseas), but this regularly meets with too much resistance for anything to come of such proposals.
The NZ Superannuation fund (colloquially known as the Cullen Fund) has over $40 billion in assets to underwrite the future provision of New Zealand Superannuation. All of these factors mean that for most baby boomers and older, the current level and provision of income in retirement from the State is likely to remain for many years.
The Office of the Retirement Commissioner was set up in 2001 and has since been transformed into the Commission for Financial Capability, and has had a number of different leaders over the years. With responsibility for the money education website 'Sorted', the office has achieved great things since inception.
The new Commissioner is Jane Wrightson, who is taking a different approach. She has undertaken an extensive analysis project with expert advisers to establish a purpose statement for the New Zealand Retirement Income system, to provide a framework for the office to advise and work with Government on the issues.
We thought it was a great step in creating an understanding of the situation, but also in providing more stability for the concept and make-up of New Zealand Superannuation going forward, so thought it was worthwhile sharing the Purpose Statement with you here.
A stable retirement income framework enables trust and confidence that older New Zealand residents can live with dignity and mana, participate in and contribute to society, and enjoy a high level of belonging and connection to their whānau, community and country.
To help current and future retirees to achieve this, a sustainable retirement income framework’s purpose is twofold:
1. To provide NZ Superannuation to ensure an adequate standard of living for New Zealanders of eligible age. NZ Super is the Government’s primary contribution to financial security for the remainder of a person’s life.
2. To actively support New Zealanders to build and manage independent savings that contribute to their ability to maintain their own relative standard of living.
The retirement income system sits within the broader government provision of infrastructure also needed to enable older New Zealanders to live well, such as health care, housing, and transport.