Retirement income has become one of the major public policy issues of our times. This reflects older citizens’ legitimate concerns about having enough income in their retirement, and policy makers’ and taxpayers’ concerns about how public contributions to retirement income are to be funded with an ageing population.
The issue of retirement income as a public policy issue is relatively new in human history. Until recent centuries in what are now developed countries, most older people did not formally "retire" on any type of separate cash income. Instead, most were part of extended families and continued to take part in daily economic activities as long as they were able, sharing the family resources to meet their daily needs. Several generations often lived and worked in the same household, or at least in the same village. Older and younger family members were supported by semi-subsistence peasant farming, and by craft or other activities organised on a household basis.
This pattern still prevails in many developing counties, and is also part of the culture of some recent immigrant groups to New Zealand and was the traditional pattern in Māori society. However, in the modern world of which New Zealand is a part, this type of society has now largely vanished. The household economy has been replaced by a commercial cash economy. And in this type of economy older people:
- formally retire from paid work in later life
- normally live independently from their children or other relatives
- need a significant separate cash retirement income to sustain them.
All developed countries have responded to this by setting up public and private types of retirement income. The nature and basis of these systems have become an increasingly important policy issue as the proportion of older people in the population continues to rise.
This publication provides information on retirement income issues from a New Zealand and international perspective. It:
- summarises retirement income approaches adopted around the world
- examines the New Zealand situation and its history
- identifies the main policy options for adjusting to a rising proportion of elderly people in the population proposed in a range of official reports.
The paper provides factual, independent background information. It does not provide a justification for past policy decisions, nor does it seek to take a position on future policy options.