NZ pension scheme ranks 9th - but is it sustainable?

New Zealand’s pension system has been ranked ninth in the world in terms of its ability to meet the needs of a changing population.

Wednesday, October 24th 2018, 6:00AM

Mercer has released its latest Global Pension Index, which appraises how well countries are prepared to provide financial security for retirees in a way that is adequate for individuals ad sustainable for the economy.

In total, 34 pension systems were considered.

The Netherlands were first, with Denmark second, then New Zealand in ninth.

Mercer said there was growing tension between adequacy and sustainability.

“It’s a challenge that policymakers are grappling with,” said report author David Knox. “For example, a system providing very generous benefits in the short-term is unlikely to be sustainable, whereas a system that is sustainable over many years could be providing very modest benefits. The question is – what’s an appropriate trade-off?”

Knox said it was not enough for a system to be sustainable or adequate; an emerging dimension to the debate about what constitutes a world class system is “coverage” and the proportion of the adult population participating in the system.

“In some countries, broad coverage has been successfully accomplished through compulsory workplace pension systems or, in some cases, auto-enrolment arrangements.

“However, with changes in the way people are working around the world, we need to ensure these schemes include everyone so that the whole workforce is saving for the future. This includes contractors, self-employed, and anyone on any income support, be that parental leave, disability income or unemployed benefits.”

David Anderson, president, international, at Mercer said it was a positive step to see governments tackle pension reform as life expectancies continued to rise.

“Developed economies have been aware of the demographic challenges facing their pension systems for some time. Where economies are less developed, it’s pleasing to see many governments recognising the same trends emerging in their own populations and taking steps now to address this. Such actions make future pension systems more sustainable over the longer term,” he said.

Tags: Mercer NZ Super