Declining homeownership, increasing debt will have future retirees struggling says expert

Future retirees will be in "worse shape" than today's and will need more support, according to a review of retirement income policies.

On top of the knowledge that younger generations will have a harder time retiring, Superannuation will only be sustainable for the next 30 years, says interim retirement commissioner Peter Cordtz.

For younger generations, this is concerning news.

"It would be a risk to assume tomorrow's retirees look like today's retirees," Cordtz told Magic Talk on Wednesday. 

"Declining homeownership rates, increasing debt levels - future retirees are going to be in worse shape and need more support," he said. 

According to Cordtz, the Government should step up and consider other options to save the future of Superannuation.

"The numbers suggest [Superannuation] is sustainable for the next 30 years," he said. But after that, the future seems murky.

"People seem to think there's an endless pool of money which Super comes from," he said.

"But today's taxpayers pay for today's retirees and because of our ageing population and our lower birth rates, the squeeze does go on into the long term on how sustainable that is."

He says solutions such as a progressive income tax should be considered if the Government wants to ensure security for younger generations when it comes to their retirement.

"One of the ideas proposed by the University of Auckland's retirement policy centre is a progressive tax scale, which essentially would claw New Zealand Superannuation back from the brink,"

That means any income made beyond 65 would be taxed on a scale to "claw" Super back. 

"We think pre-retirement preparation is probably the most pressing issue for Government to consider."

He also says the incoming commissioner needs to focus on the purpose of Super, in order to target debates around what needs to be done.

"I think the purpose of Super is relief of poverty or hardship in retirement but there isn't a purpose statement in the legislation,  and people think it's about ensuring comfort in retirement, others thought it's a social contract and an entitlement for paying taxes," he told Magic Talk.

"One of the really important things for the incoming commissioner to create a purpose statement for the future of Super - that means the decisions made around how you tinker with it have a different context."