Retirement Commissioner to look at annuities, retirement income policy
The terms of reference for the three-yearly review of retirement income policy due this year.
Commerce Minister Paul Goldsmith wants the Retirement Commissioner to look at how retirees manage their assets using products such as annuities and reverse mortgages, and in a low-interest rate environment.
The terms of reference for the three-yearly review of retirement income policy due this year were today tabled in Parliament, and show several new additions from the 2013 review. They include how retirees manage their private savings assets, through withdrawal patterns, the development and use of annuity and equity release products, and the impact of low-interest rates on their management.
Interest rates around the world have stayed low since the global financial crisis, which has reduced returns for savings in term deposits and restricted the ability of superannuation schemes to generate large enough returns to cover payments to their members. At the same time, firms have been looking at ways to provide superannuitants with cash through other products such as reverse mortgages, which are often pitched as a way to free equity in residential property, and annuities, which provide a regular fixed income and are a largely undeveloped market in New Zealand.
Retirement Commissioner Diane Maxwell, into the third year of her three-year appointment, will also look at the impact current policies are having on current and future generations, "with due consideration given to the fiscal sustainability of current New Zealand superannuation settings."
In 2013, the commissioner's report wanted the government to link the age people can access the national pension to their rising life expectancy, saying ministers needed to settle on policy by 2017 to provide a long lead-in period to bed in changes.
Treasury officials have long heralded the danger of a rising pension bill as the nation's population gets older, though the current administration has insisted the current policy of getting a pension from 65 years of age is affordable and Prime Minister John Key has pledged to resign rather than change the entitlements.
Mr Goldsmith wants the commissioner to look at the country's ageing workforce and the challenges it poses to the norms of retirement. Ms Maxwell has also been tasked with assessing financially vulnerable groups in retirement, and how effective the current framework is for them.
The review will also look at trends and developments in KiwiSaver and other savings schemes, in particular the impact of policy settings on KiwiSaver participation and contributions, and any gaps in how data reporting could be improved.
Retirement Commissioner
Paul Goldsmith
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