What the protests in France can teach us about retirement & KiwiSaver

You may or may not have heard about the ongoing protests against plans to raise France’s retirement age. Now you may be thinking, what does this have to do with us here in New Zealand or my KiwiSaver?

Well, concerns about an aging population and the stress it puts on the economic output of any country is a valid point of discussion. New Zealand is not immune to this issue and it is particularly why KiwiSaver was established in the first place. 

More often than not, government pension schemes are funded by taxpayer money. If the aging population trend continues upwards, taxes will have to increase in order to fund growing pension recipients. 

Raising the retirement age is certainly a measure to counter this additional cost on taxpayers, yet clearly unpopular in France. However, President, Emmanuel Macron is pushing ahead with his plan to raise the retirement age from 62 to 64. 

The New Zealand government also announced in 2017 that the NZ Superannuation age will increase to 67 in 2040. As they are both developed economies with an increasing average life expectancy, we are able to draw comparisons and lessons. In this article, we’ll break down what is happening in France, make a few comparisons, and the NZ Superannuation system. Moreover, we’ll talk about how this relates to KiwiSaver investment and your overall retirement plan. 

What Is Currently Happening In France?

President Emmanuel Macron and his government have been wanting to introduce reforms to the French pension system since 2020. According to Diem25, the first attempt was shelved due to widespread protests and the Covid-19 pandemic. 

The second attempt is the cause of the current protests happening all over the country, and particularly in Paris. At the core of the reform process which began in January of this year, is to increase the retirement age from 62 to 64 years. 

There have been weekly protests since, with 7 March 2023 seeing historic participation numbers of up to 3.5 million. According to polls, 80% of people in France are against the reform and what the government did next only added fuel to the fire.

On the 16th of March, the government bypassed the National Assembly by invoking controversial article 49.3 of the Constitution. That meant that they had bypassed a likely hurdle to the reform in exchange for a motion of no confidence. The vote of no confidence failed and the reform was on track to becoming law.

Since then, The Guardian reports public anger is growing with workers abandoning jobs, protestors clashing with police, and more. In this evolving story, April 14 is the next important date of what is to come. The highest authority French court is set to rule on the constitutionality of Macron’s pension reform. 

How Does NZ’s Retirement Age Compare Against Other Developed Economies?

While the French are protesting over an increase in their retirement age from 62 to 64 years, NZ’s is currently higher than both numbers at 65 years. That is why we decided to compare how New Zealand’s retirement age stacks up against some of the leading economies. Looking at the median age of the population and life expectancy also plays a role in discussing this particular topic. Here’s what we found: 

Sources: Trading Economics & World Data.

As we can see, all indicators point to New Zealand having less to worry about when compared to France in regard to an aging population. That is because life expectancy and median age are both lower than that of France. And yet, our retirement age is currently higher and set to rise to 67 by 2040. 

From our research, we found that most developed economies have a retirement age of 65 or above. The likely reason is to counteract the stress that the pension scheme puts on the economy and cover labour shortages. 

Thus, the question is, should the New Zealand working class be more upset with our retirement system, or does the French government have a point?

NZ Superannuation

The New Zealand Superannuation or NZ Super is what the pension system is called here. Additional to your savings in your KiwiSaver scheme at the age of retirement, you are also eligible for NZ Super. 

Work and Income state these as the main eligibility criteria for NZ Super:

• Those aged 65 years or older.
• Either a New Zealand citizen, permanent resident, or on a residence class visa. 
• Ordinarily reside in New Zealand, the Cook Islands, Niue, or Tokelau when applying.
• Lived in NZ for at least 10 years since you turned 20 and at least 5 years since turning 50. 

If you meet these criteria, you are still eligible to apply even if you’re still working or getting additional income. Additional income may mean withdrawing from your KiwiSaver account or other investments for example.  

In terms of how much you could get in dollar value varies depending on multiple factors. Those are whether you are single or in a relationship, your living situation, and any overseas pensions you receive. For up-to-date information, you can check out Work And Income’s payment rate breakdown. However, here is a summary as of April 2023: 

• If you are single, you may be eligible for a fortnightly payment of up to $1,157.34 before tax. 
• If you are in a relationship, you may be eligible for a fortnightly payment of up to $879.58 before tax each. 

Depending on your lifestyle, you can see how joining KiwiSaver is of substantial benefit to supplement your NZ Super payments. 

What Does This Have To Do With Your KiwiSaver?

Put yourself in the shoes of a French citizen who has worked as a teacher their entire career and is just about to turn 62. Having made a modest annual salary and living alone while paying rent, means you have a small savings account. You can see that if you were set to retire at the age of 62 but now aren’t eligible for a pension until 64 can have a huge impact on your financial well-being. The options are to either continue working for 2 more years or retire and live off your modest savings. 

This only highlights the importance of setting up KiwiSaver as early in your career as possible. As scientific breakthroughs make it possible for us to live longer, we must ensure we are financially ready to sustain this trend. 

For the majority of New Zealanders, the KiwiSaver investment options are at the core of their retirement plan. The biggest reason why it was set up was simply due to data showing that Kiwis did not save enough. Accessing KiwiSaver only to buy your first home or post-retirement is a way to encourage people to save more than they are accustomed to. 

It doesn’t matter if you register through your employer or have KiwiSaver self employed. Signing up and contributing puts your financial fate into your own hands rather than relying on the government pension. Have you checked your balance via your KiwiSaver login and asked yourself the important questions? At the current rate of contributions and returns, will you have enough for retirement? Do you need to change KiwiSaver strategies or schemes to better suit your goals? These questions and the answers are always evolving. I check my KiwiSaver login periodically to ensure I’m on track to achieve my retirement goals and so can you.

Your Retirement Plan

The current protests in France only bring to light an almost universal concern about retirement planning. It shows that relying on a government-controlled pension system can significantly hamper your retirement plan. 

Although it’s not glamorous to think too far ahead, it is really important to create some sort of retirement plan. In fact, the earlier you start thinking about it, the better your chances are to retire comfortably. Purchasing your own home if you can and putting as much as possible into early mortgage repayments is one strategy. Even a few dollars each month will make a big impact in the long term. 

The same goes for KiwiSaver sign up and consistent contributions. The compound return over years of investment into KiwiSaver funds will make a positive difference post-retirement. As KiwiSaver is the most accessible way of investing for most Kiwis, it is easy to just set and forget. However, getting professional KiwiSaver advice might be just what you need to understand and get control of your retirement plan. 

You may also invest in mutual funds via reputable investment providers as an additional long-term investment. The point is, you should diversify and invest long-term so you aren’t worrying financially once you stop working. Although that may seem like a luxury you don’t have, being frugal when necessary, and investing even a dollar, counts.