The Labour Party officially kicked off its election campaign on October 27, 2011 by announcing a suite of policies aimed at building national savings and helping us afford the rising costs of New Zealand Superannuation.
Unexpected among these policies was its promise to gradually increase the superannuation eligibility age from 65 years to 67 between 2020 and 2032.
The plan would be to raise the age by two months each year over those years.
This is fiscally sensible, as it tackles the rising costs of superannuation that are projected over the next 40 years. It also ends years of the major parties not considering a change to the eligibility age.
The financial pressures of the Scheme, which were once looming, are now approaching fast, as the first of the baby boomers retire this year.
We already spend more on superannuation than we do on any other benefit.
Over 500,000 New Zealanders currently receive superannuation and Treasury projections estimate this could reach 1.3 million by 2050.
The demographic change would increase the cost of superannuation from 4% of GDP to 8% in 2050.
The increase is primarily because each eligible New Zealander will receive superannuation for a longer period, since people are generally living longer.
Today, a person can expect to live until 80 years of age.
By 2050, they could reasonably expect to live until 85 years of age.
Increasing the eligibility age would make superannuation more affordable, thereby lessening the tax burden that would otherwise be required to foot the increased bill.
The change would put New Zealand among a number of other developed countries, including Australia, Germany and Denmark, which have already increased their eligibility age to 67.
Although possibly the transition should begin sooner than 2020, this is a sensible and welcome move, and hopefully heralding the beginning of a more mature debate on superannuation.
