Listener: 7 July 7, 2012.

I am appalled by the Prime Minister’s deferral of consideration of the age of entitlement for New Zealand Superannuation. Many think it should be raised from 65 years. Key said he was more focused on immediate issues than on longer-term ones. That is an appropriate attitude for a money-market dealer, who locks up each night to start afresh in the morning. It is not appropriate for a prime minister. One of the functions of government is to provide a long-term context for its people. They don’t want to wake up one morning to learn that the age of retirement has suddenly become a matter of focus, and will be ratcheted up the day after tomorrow. (Which is sort of happening in Europe.)

Many want to plan for retirement. (We owe something to the younger generations, whose taxes currently pay the state retirement pension, who recognise the current scheme is unsustainable and do not expect to get a state pension when they retire.) The private sector needs greater certainty so it can offer good retirement plans and annuities. Key was responding to a report by the Financial Services Council, the lobby group for the sector. Given the policy confusion, should we establish a royal commission on retirement? If we give it some urgency – yes, Prime Minister, it is a matter of immediate significance – the commission could be functioning by September and report back within a year. Its recommendations would form the basis for public discussion in 2014, and be part of the party election manifestos at the end of the year.

Most parties would promise something close to the royal commission’s conclusions. They will want to differentiate their offerings, but given the commission’s sensitivity to the national mood, it will not be by much. One party may reject the findings completely, but it would be targeting a niche constituency. What might a royal commission conclude? It would be its own master, so anything I say has to be conjecture. But I wouldn’t be surprised if it recommended raising the age of entitlement by three months in April 2015, say, and by three months in succeeding years. That would mean the age of eligibility would be 67 in 2022. Should we stop there? In an earlier column I argued that we should set the age of eligibility at the point where the expectation of life is a further 15 years (Listener, August 12, 2006). That expectancy is similar to the level for earlier retirement schemes.

Since then the elderly have lived longer. A 70-year-old today can expect to live another 15 years on average. In this approach that age of entitlement would be reached in 2042 (although probably longevity will have risen even further by then). No doubt a royal commission would consider many related matters. We need to review how well the current arrangements are looking after those who have to retire before they reach the entitlement age. (Special provisions were put in place in 1993, when the age was phased up from 60 to 65.) We also need to pay more attention to the health needs of the elderly. A woman over the age of 85 uses about six times as much public health care as average. I favour a lower or later public retirement provision for the younger elderly if it leaves more funding for the real oldies. I grieve for the young elderly (and 50-year-olds) who are lovingly struggling with their failing ninety-plus-year-old parents.

Establishing a royal commission on retirement has to be a cross-party decision, with the opposition parties consulted about its membership and terms of reference. That also puts a constraint on the Opposition. It would be very easy to embarrass the Prime Minister given the unfortunate position he has taken (although he has indicated he could change his mind). They need to be statesman-like as he has to be by setting up a commission. Our future retirement provision is too important to be left to petty politicians.