Forgive Me

Readers, if I tell you my dirty secret, will you promise not to desert me in droves?

Okay, just hear me out. It's a bit of an ask, when you don't even know what odious thing I'm about to reveal.

Gee this is awkward. How do I begin?

Okay, I'll start with this news article.

Former National leader Don Brash has waded back into the retirement debate, suggesting future governments let workers decide for themselves what age to retire. 

His call coincides with a major retirement income policy seminar in Wellington this week where there are expected to be calls for compulsory superannuation to help prepare for a looming "silver tsunami".

Dr Brash is also raising the alarm over New Zealand's ageing population. In a speech to an Auckland business audience yesterday, he said workers should be able to decide what age to collect a pension, with the rate determined by the age at which they start.

He said changes to the age of eligibility were inevitable as the number of retirees soared in comparison to the number of workers.

"The acceptance of this would be greatly helped if we allowed people much greater flexibility as to when they actually start drawing the pension, with those who chose to draw the pension down early being paid a lower rate over the rest of their lifetime compared with those who chose to draw the pension down later.

"That flexibility would have substantial indirect fiscal benefits but, arguably, even more important, it would encourage older New Zealanders to stay productively engaged in the community."

Such a system would also give people a greater degree of choice about when to retire, he said.

"If the age of eligibility were 67, for example, under a policy allowing flexibility regarding the age at which it could be drawn, somebody might choose to take the pension at, say 65. At that younger age, the amount received would be actuarially adjusted downwards and would remain at that lower level ... until death."

So you're thinking "Brash has been smoking something again". Choice? What choice do people have about when to retire?

But here's the filthy secret. I actually think Brash might be onto something. Because we are going to have to accept sooner or later than we can't all retire at 65.

Admittedly, the Government's decision to suspend contributions into the Cullen Fund aren't going to help the situation, but more people live longer so we need to accept the fact that, sooner or later, we'll need to raise the retirement age. I don't know how far away that time is, but it will come eventually. This is starting to happen in other countries.

The other alternative is to reduce the amount of the entitlement, but then that would potentially increase rates of poverty among the elderly.

So raising the retirement age is the most likely scenario - eventually. But no government will agree to do it in this current environment. It's politically toxic to even suggest raising the retirement age.

Brash's proposal is not the craziest thing he's come up with. If we accept that at some point we'll need to raise the retirement age but acknowledge that it's politically difficult to do so, then something like what Brash is suggesting may make it easier to convince people of the need for change. Those who really want to retire at 65 can still do so, but those who hold out because they really don't need to retire will receive more when they do.

That doesn't mean we should just adopt what Brash is saying, because I still see a number of issues with it. For example, what entitlement rates do we set for those who want to retire at 65? If we set the entitlement rate too low we may just end up creating poverty.

But surely it can't hurt to at least discuss these things, rather than simply shut down the debate.

And so that's my dirty secret. I found myself not disagreeing wildly and angrily with something Don Brash said. I'm really sorry, but can we still be friends?