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May 24, 2025 • 14 mins

The Budget didn't bring any changes to the pension - but Prime Minister Christopher Luxon has doubled down on his support for raising the age. 

Luxon and his soon-to-be Deputy Prime Minister David Seymour, are on the same page when it comes to raising the pension age to 67, but Seymour says Winston Peters is standing in the way of changes. 

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Speaker 1 (00:05):
You're listening to the Weekend Collective podcast from News talks 'b.

Speaker 2 (00:10):
Budget didn't bring any changes to the pension, but Christopher
Luxon has doubled down in his support for raising the
retirement age. Luxon and soon to be Deputy Prime Minister
David Seymour are on the same page when it comes
to raising the retirement age to sixty seven. Not immediately,
of course, I think they're going to take ten years
or so to do it. But Seymour says that Winston
Peters is standing in the way of changes, and there

(00:30):
are questions about whether it's necessary, whether it's fair or
even effective. And Michael Littlewood has spent years studying New
Zealand's retirement policy and he is the co director of
the Retirement Policy and Research Center. And Michael Littwood is
with me now, gooday, good afternoon.

Speaker 3 (00:46):
Hi Tim. I'm no longer the co director of the Retirement.

Speaker 2 (00:49):
Follow Oh sorry about that.

Speaker 3 (00:51):
I am retired, but I still have a deep interest
in this issue.

Speaker 2 (00:55):
Good on you. Okay, sorry about that. Hey, is raising
the retirement age necessary?

Speaker 3 (01:03):
The short answer is, we don't know. And when people
say it should be raised to sixty seven or sixty
eight or even to seventy, as has happened recently in Norway.
They we can't make that kind of judgment because we
simply don't have good information. And this is not the
only area in which we don't have good information. And

(01:24):
you mentioned the change to care WESA that was announced
in the budget. I personally would have got rid of
the tax and centives altogether, but I think it's really
no business of the government to be involved in that
kind of thing. So going back to your question about
the pension age, and I prefer to call it the
pension age rather than the retirement age, because they are.
The pension age has been sixty five effectively since the

(01:47):
Old Age pension began. There were interim arrangements between sixteen
sixty five back before nineteen seventy three, but then the
age went back to sixty when Muldoon wanted to get elected,
and then return to six a few years later. So
sixty five has been the effect of age. But the

(02:10):
reason we don't really have enough information on which to
make any kind of an informed decision is because we
don't have good information about how people transition from full
time work to full time retirement. And that's changing that
people are becoming working much longer than they used to,
and so I would pause before making any recommendation as

(02:36):
to what the age should be.

Speaker 2 (02:38):
I guess how long. I guess. The numbers that I've
heard tuted about how much more it's going to be
costing over the years are kind of frightening in terms
of the percentage of GDP we're spending just on sorry,
the percentage of the government's budget we're spending on retirement.

Speaker 3 (02:55):
Yeah, the dollars look huge, but you express the cost
as a percentage of GDP. New Zealand has one of
the lowest costs of the age pension of any developed country,
and that cost has actually surprisingly been coming down since
the Treasury started first putting data out on this in

(03:18):
year two thousand was the first year they did it.
At that stage it was and the twenty sixty cost
of New Zealand SUBA was expected to be more than
nine percent of GDP net.

Speaker 2 (03:28):
Yeah, so you don't think money's a problem, then it's affordable.

Speaker 3 (03:33):
But of course, as with any government spending, it depends
where you want to put your priorities. So I think
that's a long roundabout way of saying that we really
need to get down to fundamentals and gather data on
what matters in this area. And it's not just the
age itself, it's issues like home ownership. We've got terrible

(03:56):
data on home ownership, so we don't really know what
proportion of the old population owns their own home outright,
and that's a very important part of the puzzle and
we need to improve that. We need to have clear
data about how people are managing. We've got some information

(04:16):
on that and on that for example, we know that
the old in New Zealand have one of the lowest
poverty rates in the OECD. Yeah, so something's working in
that area. It's just that we don't have a great
handle on what is working. So before we start tinkering, well,
we really need to understand the issues. Unfortunately, the Retirement Commission,

(04:40):
which is where you expect that sort of data to
come from, isn't given the necessary resources and the necessary
brief to look at that sort of issue.

Speaker 2 (04:53):
Do you think, I mean, do you think you need
to tailor the retirement for sorry, pension age or pension
differently depending on people's individual needs. Are you all for
means testing or are there other arouse around the one
size fits all.

Speaker 3 (05:07):
Yeah. I used to be a believer in men's tests. Yeah,
and that's income and asset because, said quickly, it doesn't
make a lot of sense to pay money to people
who don't need it.

Speaker 2 (05:20):
Yeah, well, I guess the question of who needs it
because the pensions not a hell of a lot of money,
is it. I mean most people, most people assume you've
got to augment your income with either your savings or
you just don't. You don't actually retire.

Speaker 3 (05:32):
Surprisingly, for some people who reach pension age, the New
Zealand superannuation benefit is actually an improvement in their living standards,
you know, and those people clearly need that kind of support.
But just going back to your original question, as I say,
I used to believe in income and asset tests. But
you only need to look across to Australia to understand

(05:54):
what that actually involves. It's a hugely complex system because
they test both income and assets and it's the hire
of the tests, the the ply to the pension that
you get from the state in Australia, which is called
the age pension. Financial planners love it because the more

(06:14):
complicated you make the system, the more gaps you create
and therefore the more opportunities you have you to shelter
about assets and income. But also it changes people's behavior.
If you have an income or an asset test, then
clearly people will work to those tests. And what we
see in Australia, for example, is fewer older people working

(06:40):
than in New Zealand.

Speaker 2 (06:41):
What do you think, Well, I think it's Australia. Australia
is always an unfortunate comparison, doesn't because it always seems
to have more money to go around on lots of things.

Speaker 3 (06:49):
But it is richer.

Speaker 2 (06:51):
Yeah, it's richer, which does make a big difference. I mean,
if we're all richer than we wouldn't be so stressed
about it, I guess. But how would you what changes
would you make? Would you can? What do you think
needs to change?

Speaker 3 (07:03):
Well, we have I think the best tier one pension
in the world, and Tier one is the basic government
old age income support. It is the best. It can
unvoudedly be made better. There are some aspects of the
current rules which do need to be fixed, and we
need to look at all of the things. An actual

(07:26):
or real friend and I put a submission into the
Retirement Commission's twenty nineteen review, and in that we outlined
everything that the Retirement Commission should be looking at but
can't because they're not given the brief or the money
to do it. We identified fourteen questions which need answers

(07:47):
when we make a final decision on what New Zealand
soof you should.

Speaker 2 (07:50):
Look like, and can give us a couple of highlights
of those questions.

Speaker 3 (07:54):
The age, what is the appropriate age? What is the
appropriate amount? We've never had an evidence led public discussion
on the size all the shape of New Zealand Super
We've got there by accident. It happens by accident to
be the best scheme in the world in my view.

Speaker 2 (08:12):
But we do have an idea about how many more
people we're going to have it retirement aged. Oh, we've
lost them there. I think we've just accidently accidently had
Michael cut off there. I might just see if we
can get them back. We'll take your feedback on this
as well, because yeah, I'm keen to dig in on
that as well. You can, by the way, you can
text your feedback on that. And just while we're getting

(08:34):
Michael back on the line, which we are doing right now,
let's have a look at a couple of the texts.
What have we got here. It's difficult to quickly do
that in real time, but I think we've got Michael
Littleward back now. Sorry, we just lost you there, Michael.

Speaker 3 (08:47):
Not sure what Sorry you were saying. Yeah, the age,
the amount. One key thing that needs to be really
fixed is the way in which we calculate the amount
payable to single people living alone. Yeah, it's higher than
for single people sharing accommodation, and that creates some distortions

(09:08):
and difficulties with the application of the payment. So that
should be simplified. Whether there should be an income test,
which is the question we were talking about earlier, and separately,
whether there should be an asset test the rules that
apply to people who lead New Zealand after the state
pension age. So there's a whole bunch of stuff that
we should be talking about, and until we resolve those issues,

(09:32):
we cannot really say for certain that we know exactly
what's going on.

Speaker 2 (09:36):
No, I guess there are things you talk about the evidence.
We can work out a few things in advance in
terms of projections of how many people are going to
be living longer and how much the cost is going
to be to our I mean, what's your view on
the age? Do you think it needs to go up?
Because logically, just from a lay point of view, I think, well,
we're all living longer we've been living. I mean, sixty

(09:57):
is the new fifty. We're living on average, far longer.
The cost of the government is clearly a lot more
I would have assumed, and so to me, it just
seems like a matter of time before we shove the
age up.

Speaker 3 (10:08):
Yeah before. I mean, personally, I think it could go up,
but I wouldn't make that decision unless I had all
this information that I've been talking about.

Speaker 2 (10:18):
So is that where that's gone wrong? Is that Luxon
has said that he's you know that he thinks it's irresistible,
we're going to stick it up, and Winston's resisting. I mean,
I think everyone's argument for political reasons. You're coming out
at it from just let's just work it out as
a sensible solution, regardless of whether you're left or right.

Speaker 3 (10:34):
Indeed, and one of the things that I have discovered
over the decades that I've been involved in this discussion
is that leading these decisions to the political process is
the worst way of doing things.

Speaker 2 (10:46):
So who should well, who should make the decision?

Speaker 3 (10:48):
A good question. Well, I participated in something which was
almost sort of slightly magical in nineteen ninety one and
nineteen ninety two. I was a member of the first
Todd Task Force. Yeah, and I went into that process
thinking that New Zealanders should be forced to say for retirement,
but we needed to give them tax breaks in order
to help them do that, that New Zealand super should

(11:09):
the income and asset tested. And I was put on
that commission, I think because I thought those things. But
the fifteen months or so that we spent on that
work convinced me that I was wrong on all of
those things. And of course I've been the lasting me
boring about it ever since.

Speaker 2 (11:28):
What okay, let's just get on In the end, I mean,
these are but you can't help. But it be a
political political question that because that lifeless politics, I guess
we have.

Speaker 3 (11:39):
To have a consensus.

Speaker 2 (11:41):
And the only way, well, you're never going to get
that away.

Speaker 3 (11:43):
It's like we had it in nineteen ninety two. It
didn't survive the referendum, as you as you as you observe.
But the thing about further, and it applies to both
public and private provision. Once you've got the data, the
answers are normally reasonably apparent, even to the political opposition.

(12:07):
You're very optimistic, and I am optimistic oness because I
am convinced that if we had all the information that
we needed, the decisions would be relatively obvious. And what
you would then say to the system, if you like,
is we will have a constant review of these things
so that if the data changes, we test that against

(12:28):
the system to make sure that it still fits the surface,
so nothing is locked in stain. And the trouble with
politics is that the moment it becomes political, people's positions
get hardened up.

Speaker 2 (12:39):
I guess the reason I'm cynical about that optimism you
have is because we can have two different parties looking
at the amount we're spending in our deficits and how
long how long it's going to be for surpluses, and
one party will say let's tax and spend them more
on the other will say, we know we need to
we need to be conservative, and we have completely different views.
Why would the pension ase be any different.

Speaker 3 (13:00):
Well, that goes back to another issue about superannuation. When
you're designing a superinnuation scheme. It doesn't matter whether it's
public or private. You put to one side the cost issue,
you say, what is the best scheme that we can have.
Then you look at the cost, and if the cost
is unacceptable, then you've got to trim the benefits in
order to fit in with the envelope. So cost is

(13:23):
the last thing we should be talking about. And when
people start panicking about the number of people who are
going to be reaching state pension age and the huge
amounts of billions of dollars that we're going to be
spending and the extra billions that we're going to be
spending next year and the year after, that's the wrong
that's the wrong end of the stick.

Speaker 2 (13:41):
Do you think we can get the public on board
with the change if it had to be made?

Speaker 3 (13:47):
I think so. One of the things that I would
love to see happen is that we should get rid
of the New Zealand Superannuation Fund. Now, all of a sudden,
that changes. One of the puzzles for me on the
government's finances is that the money that's in that fund
is not actually regarded as an asset. Okay, So if

(14:07):
we got rid of that fund, repaid debt. All of
a sudden, our debt situation looks a lot better.

Speaker 2 (14:14):
I had not. I don't know how many other people
can consider that, but hey, thanks for your time, Michael.
I really really appreciate your time. That's Michael well Littlewood.
He is a former co director of the Retirement Policy
and Research Center. I think I've got that right. I
really really appreciate your time than Michael thinks so much.

Speaker 1 (14:29):
For more from the Weekend Collective, listen live to News
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