Patrick Nolan: Retirement Commission Policy and Research Director on the call for changes to the retirement income system

A warning New Zealand needs to act quickly on strengthening our retirement income system. 

The Retirement Commission's income policy review has found a longer-term political focus is needed to ensure future generations' certainty.  

It makes 12 recommendations, including moving more quickly to implement KiwiSaver reforms, and harder strategies such as a new cross-party accord.  

Policy and Research Director Patrick Nolan told Kerre Woodham we now have people over 65 than we have under 15, so we need to act now. 

He says New Zealand is going to look very different into the future, so these conversations need to be had. 

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Episode Transcript

Speaker 1 (00:06):
You're listening to the Carrywood and Morning's podcast from News
Talks headb. The Retirement Commissions calling for big changes to
strengthen our retirement income system while we can. It's retirement
income policy reviews found a longer term political focus is
needed to ensure future generation's certainty. It makes twelve recommendations,

(00:29):
from moving more quickly to implement key we SABER reforms
to hardest strategies such as a new cross party accord.
There will be a million people over sixty five by
twenty twenty nine, there'll be one and a half million
by the twenty fifties. Retirement Commission Director of Policy and Research,
Dr Patrick Nolan joined me just before the show to discuss.

Speaker 2 (00:52):
Good Morning, Why is any.

Speaker 1 (00:55):
Kind of conversation around retirement policy so charged? Every time
I try and have a conversation on talkback around it,
older people get really exercised. But really it's not going
to affect them, is it. It's the working age people
right now who need to start making decisions about what
policy looks like in the future.

Speaker 2 (01:15):
Absolutely, And I always thought that was a bit of
a puzzle. But when you think about how forty percent
of people over sixty five rely on New Zealand super
for you know, nearly all of their income, and then
about another twenty to thirty percent only have a little
bit above that, you can see why there's actually quite
a lot of anxiety about the change. And even though

(01:36):
people may not be directly affected by the changes, they're
still worried about the integrity of the system and the
sustainability of it. So that's why I think, you know,
people are just quite concerned or they're quite anxious about
any changes in this area.

Speaker 1 (01:48):
But if you're seventy and over, you do not need
to worry. It's the working age population that have to
make the decisions right.

Speaker 2 (01:56):
Absolutely, and that's why our review of retirement income policy
it's not just about today's issues. It's about preparing for
the future. So it's about dealing with those sort of
long term demographic change. So people who are already over
sixty five or already receiving New Zealan sept but they
won't be affected. But what we've got to do is
think about how the system needs to change over the
next ten years so it's really fit for the future.

Speaker 1 (02:19):
Other countries, other Western countries and economies are facing exactly
the same issues that there is a growing number of
elderly within their populations and a shrinking workforce. So we're
going to find ourselves competing for future taxpayers, aren't we.

Speaker 2 (02:36):
Absolutely, And if you look at other countries, you can
see the lessons of actually not thinking hard and not
making changes early and in the right way. So I
often look at a country like France, which spends fourteen
percent of its GDP on pensions, and you can see
that the fact that they're spending so much on pensions
is now leading to their governments failing and they're in
a really bad position. Now. New Zealand's a long way

(02:58):
from being in that sort of position. So we actually
have about ten years to get this right. But if
we don't, we will end up with France is now.
I'm actually quite concerned about this. I think we really
need to start having quite an adult conversation about our
retirement income system and how we prepare it for the future.

Speaker 1 (03:15):
The Treasury has been screaming for more than a decade
now about exactly this, and nobody seems to have listened,
not the political parties and not the voters.

Speaker 2 (03:27):
I think that the challenge with Treasury's work, which I'm
a big fan of but I think the challenge is
it really doesn't address some of the distributional concerns, and
so what we really need is not just you know,
sort of work that shows there the fiscal costs and
what some of the challenges associated with that are, but
actually how you can make changes safely. So, actually, how

(03:49):
if you do put up the age of eligibility when
you deal on super for example, how do you deal
with the fact that some population groups do die earlier
or you know, can't access benefits as early as other people.
So how do you think about transitional benefits? How do
you think about, say, allowing early access to some pe
in certain conditions, you know, those sorts of questions that
we need to be thinking about. So I think if

(04:10):
we have a debate that's much more about how we
do it safely, I think it'll be we'd get much further.

Speaker 1 (04:15):
But then when we look at other countries they do
do it, Like Australia, you can get your pension but
early a but a lesser amount. Like if you're a
builder or a farmer and you've just knackered your body
and you can't keep working, you can access your pension
but you don't get as much.

Speaker 2 (04:33):
Oh absolutely, And I think there's lots of good international
examples that we can learn from. And so it's in
a way it's disappointed that in the Zion we do
have this kind of kind of polarize debate around retirement
income policy. I mean, that's why I think the key
message is actually it's like the front cover of The
Hitchhiker's Guide to the Galaxies is, don't panic. We've got it.
We've got ten years. But we do really need to

(04:55):
start having an adult conversation. We do need to start
thinking about some of the big decisions we're going to
have to make over the next few years, and we
need to get on and do it. But we're actually
in a pretty good position. But if we don't make
change now, if we don't think about making change now,
we're not going to be in that position for much longer.

Speaker 1 (05:11):
And twenty twenty two, almost half of Japanese firms relied
on workers over the edge of seventy. They are able
to use technology and mechanization and digitalization to keep those
workers who wanted to stay working in the workforce for longer.
That's a possibility as well, isn't it.

Speaker 2 (05:33):
Oh, absolutely, And in New Zealand we've already had a
lot of success at having people over sixty five stay
in the workforce, so we do have very high participation rates.
So I think that's something to be celebrated. So you know,
this is why I think it's not just a retirement
income fulsy. It's about thinking about technological change and productivity
and all of those sorts of things. But I think

(05:53):
that we've really got to crack them up of how
we get the retirement income system better prepared for the
future and how it can face some of these longer
term challenges.

Speaker 1 (06:02):
The other challenge too, I think is living longer is
all very well and good, but what is the point
of living longer if you don't live well, if you
don't have a good retirement, a healthy retirement. Do you
think there needs to be more focus on staying out
of hospitals, staying out of aged care, yet really focusing
on keeping people out of the health system, because that's

(06:23):
one of those huge costs as well as the pension.

Speaker 2 (06:26):
Absolutely, and I think as well as we talk a
lot about population, aging and fiscal costs, but there's a
lot of other big changes taking place and you know,
sort of issues around dementia and a lot of these
sort of age related conditions. And that's why I think
we actually have to have an adult conversation about these topics,
because if we keep just spending money in the way

(06:46):
that we have been spending money, then we're not going
to be addressed these emerging areas of need. And so
if we're going to have to start to think about, well, actually,
how do you provide more support for people to age
and face, then we've actually have to have the space
where we can actually fund that. So you know, we've
got to look across the system as a whole. We
can't just say let's just protect one part of it.
We've got to look about how we do the best

(07:09):
how we have the best outcomes for older people in
New Zealand possible.

Speaker 1 (07:13):
Well, yeah, I also just worry about the young people
because I don't think they've had a fair suck of
the sav when it comes to society. You know, when
it comes to it's supposed to be equitable for all
across all ethnicities, but also across ages as well, and
I just think, you know, I worry about the young ones, that's.

Speaker 2 (07:35):
All absolutely, And I think that's why if we don't
come up with a clear plan over the next years,
you may see a breakdown in the social contract. Yeah,
you know, we're talking about quite big changes. We now
have more people over sixty five in New Zealand than
we have under fifteen, and that's a really big change.
And looking forward, we'll soon have a million people over

(07:55):
sixty five. So New Zealand is going to look very
different into the future. So we do actually have to
have a good conversation about these these topics and think
about how we prepare for the few.

Speaker 1 (08:06):
I thank you so much for your time, doctor Patrick Nolan,
Director of Policy and Research at the Retirement Commission. Thank
you for more from carry Wood and Mornings.

Speaker 2 (08:15):
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