New Zealand’s pension system is under pressure from rising health costs and pensioners will have to pay higher premiums for their pensions to maintain their financial stability, with the Government proposing a cap on what a person can earn and when they can expect to receive a payout.
The Government is considering whether to increase the pension cap to help cover the costs of a new system that will be set up in time for the 2020 election.
New Zealanders will not be able to claim a pension until they reach age 62 and will be entitled to a pension equal to about 80% of their income until they die.
Newshub understands the government is looking at how it can cap income levels so that it can provide the same support for the same period.
“New Zealanders are entitled to be treated fairly and the Government has an obligation to provide people with the pension they deserve,” Government spokesperson Nick Hutton told Newshampers.
“The Government will be looking at what this means for people who will be receiving a pension in retirement.”
A cap on income and contributions is expected to be introduced in the Budget this week, and a cap of income will be applied to all pensioners by January 1, 2021.
The cap is set to apply to all New Zealand pensioners, regardless of whether they have been in the country for more than five years.
“We are going to have to be mindful of people who are receiving a salary or a lump sum of money,” Mr Hutton said.
“That will also affect people who work in the service sector or those in lower-paid jobs, for example, the care industry.”
Mr Huttons comments come after it was revealed last month that the Government would be reducing its cap on contributions to the NZSOP, the countrys biggest pension scheme.
This would leave some Kiwis paying out far more than they are entitled.
Mr Hutts comments came after Prime Minister Jacinda Ardern announced that the cap on New Zealands pension income would be cut from $1.6m to $900,000.
This was a move to bring the KiwiSOP into line with other countries, and to help reduce the cost of pensions for some of New ZealandSOP’s poorest pensioners.
Ms Arderne’s decision was criticised by the NZ First party, which said the Government had not done enough to make the system fairer for those living in poverty.
“It’s a big deal for people struggling with low income and the Kiwis in poverty,” NZ First leader Winston Peters said.
Newspaper and radio NZ said the cap would reduce payments to retirees, and people who have worked for the country since the early 1990s, but will have a tough time collecting the extra payments when they reach retirement.
The New Zealand Council of Social Service said the decision would mean “the poor and vulnerable will be left worse off” and the New Zealand Pensioners’ Association warned that it could lead to more people “working longer and longer hours” to pay the costs.
“These proposals are an attack on the poorest of New Zealands most vulnerable, who have already paid into the pension system for years,” the NZCSA said.
The NZCSC said the Newsham Government’s policy would cost New Zealand $100 million over the next three years.
The Auckland Council of Trade Unions said it would be “difficult to see” the Government offering any meaningful savings to the average Kiwi.
“If we have to wait until after the next election to see what the Government’s new policy will look like, I’m not sure we can see any significant savings,” Auckland council president, Mark Williams, said.
Government officials are expected to announce details of the plan at a press conference in Parliament this morning.
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