Superannuation: New research reveals more support for hiking taxes and keeping age at 65 than raising it to 67

New Zealanders remain opposed to raising the age of Superannuation to 67 or introducing means-testing, but are willing to pay more in tax now to reduce the burden on future generations, new research has found.

"Raising the age of eligibility to 67 years attracts much less support and much more opposition than raising taxes to keep the age at 65 years," the report said. "If taxes were raised, there is a preference to raise taxes sooner than later, to avoid significant increases in taxes on future generations."

Nearly 1300 people last year participated in a University of Otago study commissioned by the Retirement Commission to examine preferences towards different aspects of retirement income policy. The study is very similar to one conducted in 2014 to allow for comparison. 

Participants were asked to indicate their preference between certain scenarios, such as between keeping the Superannuation age at 65 while also paying more tax now, and increasing the age to 67 while not paying more tax now. The responses resulted in a ranking of the different aspects by importance to Kiwis.

The results of the research released on Wednesday show Kiwis are opposed to means-testing Superannuation while the universality of the scheme remains the most important aspect to Kiwis, though less important than in 2014.

The means test proposed in the study, described as "modest", would result in a $60 reduction in weekly payments to people with retirement savings greater than $200,000.

"It may be possible for a government to find a different type of means test that attracts support, but this research suggests that universality remained a cherished principle in 2022 as it was in 2014," the report said.

Almost a quarter of participants ranked keeping the age of eligibility at 65 as the most important aspect of Superannuation, more than the fifth who did in 2014. The number of people who ranked the age of eligibility as the least important has fallen by 4 percent.

However, the report said, "there is still considerable diversity in preferences over the desirability of changing the age of entitlement to 67 years".

"But the fraction of respondents who believe it is important not to raise the age is slightly higher and the fraction who would not be concerned if it was increased is slightly lower."

Raising the age of eligibility to 67 was ranked by 61 percent of the respondents as the worst of the seven options, making it the option ranked worst by the largest number of people, the report said. The unpopularity of this policy has increased compared to 2014. 

The research found a majority of people would still be willing to pay higher taxes now (an additional 2 percent for everyone) to reduce the need to raise taxes on future generations. However, opposition to hiking current taxes has increased since the 2014 study.

"This means there was less willingness to increase taxes immediately to reduce the extent that future taxes will need to increase to fund New Zealand Superannuation in the future," the report said.

"Despite this reduced support, a small majority of the respondents still would support higher current taxes to reduce the size of future tax increases, given plausible investment returns."

Another key finding is that there has been a "sizeable increase" in the number of participants much less confident they will have a comfortable retirement than in 2014.  

Retirement Commissioner Jane Wrightson said the findings support the Commission's recommendation to keep the Superannuation age of eligibility at 65. 

"It's once again been demonstrated just how critical the role NZ Super plays to large numbers of New Zealanders now and in the future," she said.

"Today, 40 percent of people aged 65 and over have virtually no other income besides NZ Super and another 20 percent only have that, and a little more.

"To provide good retirement outcomes we need to maintain NZ Super at current settings and explore other mechanisms to support those where this is not enough on its own." 

The new results show what's changed to a similar report in 2014.
The new results show what's changed to a similar report in 2014. Photo credit: Getty Images.

The question of whether the Superannuation age needs to be raised has come to the fore again amid protests in France against a move to raise the age there from 62 to 64. 

Economist Shamubeel Eaqub on Newshub Nation this month said Superannuation should be means-tested so that rich people do not receive the same amount as poorer Kiwis. 

"We should not have welfare for rich people when we refuse to invest the same amount of money and the same universality for children living in poverty. Those are the trade-offs that we're making," he said.

His ideal system would include means testing and raising the age gradually to 70. He also wants to see the gap closed between benefits and Super.

Susan St John, an Honorary Associate Professor at the University of Auckland who specialises in the economics of social policy and has written reports on Superannuation, however, said other options than raising the age should be considered.

She's previously looked at a clawback scheme where high-income earners aged over 65 would have to pay a tax on their additional income.

The Organisation for Economic Cooperation and Development (OECD) has said New Zealand needs to lift its Superannuation age to help keep debt levels in check. Aotearoa's ageing population means the scheme is going to become more and more expensive.

The National Party policy's on Superannuation remains unchanged from what former Prime Minister Sir Bill English announced in 2017, that the age of eligibility would be phased from 65 to 67 starting on July 1, 2037. That was to reflect increasing life expectancies and the rising cost of the scheme

"Every 10 years life expectancy is improving by over a year-and-a-bit, so it makes sense when other jurisdictions around the world already have 67 entrenched as their retirement age, we see a rising life expectancy, and also we have a very staged, slow response to actually increasing it slowly," leader Christopher Luxon said last year

Prime Minister Chris Hipkins earlier this year said it's not something he's turned his mind to since taking on the role, but any change would be campaigned on at an election. The Government's previously said it wouldn't lift the age. 

In January, a Newshub Reid Research poll asked whether the retirement age should remain at 65. The majority - 66 per cent said yes - while 25 per cent said no.