Kerre Woodham: The problem with our retirement system

As you'll have heard in the news this morning, the Retirement Commissioner has called for a 10-year roadmap and cross-party agreement, following the release of its review of New Zealand's retirement system. 

More Kiwis are living longer, working differently, and facing pressures around housing and care. We're facing a huge rise in the number of older people. At the same time, we're facing fewer working Kiwis who can pay for the associated costs of aged care. Current data shows that right now, for every 100 people of working age, we have 28 retirees. Those numbers are changing quickly. By 2050, just 25 years away, we're looking at 38 retirees per 100 workers. By 2060, we'll have twice as many retirees compared to workers. 

In 2019, those older than 65 received $13 billion more in government services, mainly super and healthcare, than they contributed in taxes. I mean, that's just the way it is. You end up using the health system more when you're young, very, very young, like under five, but mainly when you're very, very old. And in the middle, you shouldn't really be accessing it at all. Of course, we're seeing those numbers going up as well, but that's just the way it is. It's the Western world over. It's just life. 

Treasury has been screaming for more than a decade now that we simply don't have enough money coming in to keep the lights on. Last week it gave another warning. Debt is not only being used for capital expenditure, but to cover operating costs. So it's like using your credit card to pay the necessary bills. It's unsustainable. 

And this is occurring as the books haven't yet recovered from Covid and Cyclone Gabrielle, and as the costs associated with an aging population are set to soar. As I said, we're not alone in this. The Western world over is struggling with this. Japan's been staring down the barrel of a shrinking workforce and a rising number of oldies for years now. The Prime Minister Fumio Kishida made an interesting point in January 2023 that Japan is standing on the verge of whether they can continue to function as a society, facing as it does the twin threats of falling birth rates and an ever-increasing elderly population. And when I say elderly, they live a really long time – they've got really healthy oldies who are regularly hitting 100. In 2022, almost half of Japanese firms relied on workers over the age of 70. So they're trying to encourage older people to still participate, to continue if they're up to it, if they can. 

So we could work longer. We could make use of the technology and the digitisation and the AI if you want to continue working. We could shift health to be rather than end-of-life care, try and put an emphasis on preventing people getting health issues and try and keep people out of hospital with preventable illnesses. We could prioritise health and well-being to ensure we stay healthy for longer. 

When it comes to providing a broader tax base, we'll be competing with every other Western country to import workers, because I think it's pointless telling young people, and certainly other countries have found this, to have more babies. There's financial incentives for young couples to have more babies, but a couple of 100 bucks here and there is not going to make people have children.  

What makes young families want to have children is a belief in the future, a belief in the society in which they live, a belief that they can support the children and give them what they need in terms of and it's not just financial things, it's time. If you're working seven days a week to provide for your family, you're going to limit the number of children you're going to have. 

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