Baby boomers’ kids face later retirement?

Just as the nation’s baby-boomers enter the 65+ population, Labour Party leader Phil Goff has announced he would raise the age of pension entitlement to 67 years by 2033 with a plan for progressively raising the retirement age over 12 years, starting in 2020.

But an expert demographer suggests this may be a case of shutting the stable door after the horse has bolted. By then, most of the problem generation – the “Baby Boomers”, will have retired.

On raising the retirement age, Mr Goff said “by 2050, the number of people aged 65 and over will double to 1.35 million. Our bill for superannuation will also double, so it’s vital we plan for our rapidly aging population now.”

By phasing the change in over 12 years between 2020 and 2033, the Labour plan meant “no-one currently aged 55 and over will be affected by the change,” said Mr Goff. “For those aged 45-55, the age of eligibility will rise by two months a year, and for people 45 and under, they’ll be retiring at 67.”

Professor Natalie Jackson, director of the National Institute of Demographic and Economic Analysis at Waikato University recently published a paper, addressing the drivers of population ageing and some of the consequences for education, the labour market, governments, and business in general. She is also Vice President of the New Zealand Population Association.

Her research noted that though the children of baby boomers are largely in their 30s and 40s, the current baby “blip” in raised birth rates is unlikely to be sustained. The population’s median age has risen to 37, not only because of increased longevity and declining fertility, but because it has lost a chunk in the age bracket 25-39 to migration.

 Professor Jackson comments:

“NZ has already seen a huge and sustained increase in labour force participation at age 65+. The employment to population ratio for females 65+ has increased by 185 percent since 1990 (from 4% to 11%), and for males has doubled (from 10% to 21%) — way above the changes for Australia). The NZ changes suggest that many older people are either keen to work on, or choosing to for whatever reason — though there will be differences by occupation. My work in Australia showed that professionals are better equipped healthwise to carry on, while those who have done really hard manual work such as builders and plumbers, nurses are less able to carry on.

“Women might be more likely to sustain the increase in workforce participation. Many current older working women have come into the workforce a little later and are fresher in and more enthusiastic about their careers”.

“Superficially, raising the age of access by 2 months per year sounds a soft and gentle approach, and would certainly save a bucket of money, but there are a raft of pro’s and con’s and its difficult to make a ‘net’ call on it”.

“A major problem of having the increased age of access come fully into effect in 2033 is that the ‘official’ baby boomer population (born 1946-1965) will all be in the retirement ages by then – or at least 67-87 years of age.. so it won’t do anything at all to resolve the impact of the baby boomer wave, and will actually make things harder for those who will then be approaching 67, and whose taxes will have been stretched to pay for the boomers.. The short story is that its been left too late. Between now and 2033 the 65+ pop will increase by approximately 80 percent, while between 2033 and 2061 it will increase by another 34 percent only”.

“It would also have highly discriminatory effects on Maori (whose life expectancy is much lower), people who have done heavy labouring jobs (builders, plumbers etc) or a lot of lifting (nurses) etc.. people who lose their jobs for various reasons in their 50’s and ’60s and can’t get another”.

“NZ’s universal system has many advantages, like very low proportions of elderly population in poverty, but I believe it’s actually universal access that is what needs to be addressed. Means-testing is an expensive approach and could eat up any gains, so it’s probably not the answer either. A more sustainable approach might be to encourage those who are fit and healthy and actually want to carry on working, to waive their right of access at 65, for perhaps a slightly higher payment at a later age depending on when they do decide to retire. Some modelling along those lines would be good”.

Chris Cunningham, Professor & Director, Research Centre for Maori Health & Development, Massey University, comments:

“Age is a very blunt criterion for eligibility, and should never be used uncritically.

“As a criterion for accessing superannuation, age clearly biases towards women and against men; towards European NZers and against Maori, and against any other population with a shorter than average life expectancy, such as Pasifika.

“There are no clearcut genetic drivers for Maori disparities in life expectancy, and many would argue (from a determinants model) that broad social and economic policy settings contribute to these differences in outcomes for Maori. A feature of poorer Maori health is earlier onset of chronic diseases and disabilities (about 5-8 years earlier). As a form of redress, social provision of health services and superannuation should rebalance these differences by providing earlier access.

“Some policies of government already recognise these age-biases. When introduced, breast screening was available from age 50 years for NZ women, although guidelines allowed younger Maori and Pasifika women to be included. In 2004 the age guidelines were extended to include all women aged 45-69.

“Similarly, access to age-related disability support services provide that people aged 50-64 years who have been assessed by a DHB or DHB needs assessor as ‘close in interest’ to persons aged 65 years and over will also be eligible to access DHB integrated health and disability services for older people.

“In both of these cases, age-eligibility criteria were adjusted as a result of responsive, critical, age analyses.

“In superannuation, balance could be addressed by earlier access age for Maori, or reduced contributions over a working life, to reflect on average reduced payments received by Maori.

“Changes to superannuation policies should not blindly, or uncritically, adopt uniform age-eligibility criteria without adjusting for vulnerable populations.”