FSC welcomes blog’s contribution to pension reform debate

12 July 2012
FSC welcomes blog’s contribution to pension reform debate

The Financial Services Council (FSC) has welcomes the contribution of Michael Littlewood, in his Pension Reforms blog, to the conversation on how to provide future retirement incomes for New Zealanders.

FSC Chief Executive Peter Neilson says the country needs a thorough cross-community and cross-party debate on future retirement income policy. This was why the FSC had launched its major report, “Pensions for the 21st Century: Retirement Income Security for Younger New Zealanders”.

“The comments on our report, published in the Pensions Reforms blog, disagrees with and comments on what our proposals aim to achieve: we want to keep the option for younger New Zealanders to not only receive a pension at 65 at the level of NZ Superannuation (currently $349 per week), but also to more than double that by making retirement savings.

“It is quite legitimate for people to have different views on what retirement income we should be achieving, Mr Neilson says.

“We know our proposals are likely to be widely supported by New Zealanders. Middle-income earners here, currently have one of the least generous public pension schemes in any developed country.

“Australia is developing one of the best for middle income earners. Younger New Zealanders have the option of moving to Australia to more than double their retirement incomes. By doing so they will not be here to pay the taxes to fund NZ Super in the future. It’s a serious issue for the country to address for the long term.”

In the attached paper posted on the FSC http://fsc.org.nz/bulletin_display/x_blog_code/169.html responds to some of the points made in the Pension Reforms paper, prepared by Mr Littlewood:

In summary, the FSC disagrees with the Pension Reforms paper on whether:
• New Zealanders are saving adequately for retirement;
• voluntary savings are likely to fill the gap, and the
• importance of the growing retirement income gap with Australia and
• likely benefits of making greater use of Save-As-You-Go (SAYGO) rather the Pay-As-You-Go (PAYGO) funding of retirement pensions.

Mr Neilson says in New Zealand the debate on retirement income policy has been too narrow.
The country has
• under estimated the likely impact of people living longer after 65 (with FSC research showing 52 out of every 100 females and 44 out of every 100 males born in New Zealand in 2011 will live until they are 100 years old if current trends continue)
• the potential efficiency gains from greater use of savings and investment to fund retirement incomes and
• the learnings from behavioural economics on likely savings and investment outcomes.

“These topics need greater consideration if we are to have a sustainable retirement incomes policy into the future,” Mr Neilson says.

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