Why the world needs to save more for pensions

The global economic crisis has hit a new low this week as governments around the world are cutting pension plans and forcing millions to accept much higher savings rates.

Auckland pensioners who will have their pensions cut from 3.5 per cent to 2.5pc next year face being hit with a 10 per cent annual loss, while in Sydney, they face being left with just 2.25pc.

But there is no sign of any easing of the pressure on pensioners in New Zealand.

The Reserve Bank has warned that the Government could have to introduce a rate cut next year.

It also raised the prospect of a reduction in Newstart allowance for retirees, to give people more money to spend.

“We have a new and challenging global economic environment and the Government’s position is clear: a substantial rate cut is not in the cards,” Reserve Bank Governor Mike Quigley said.

New Zealand has been hit hardest by the global financial crisis.

Its total pension liabilities are now around $1.6 trillion, or about 6 per cent of gross domestic product.

Even the Government acknowledges the cost of the crisis, which hit New Zealand hard in 2008, is a burden.

More than 90 per cent are now on the disability pension, while the disability benefit of $2,400 is the only way to get back to the pre-crisis level of $1,300.

If you want to know what the Government has done to get Kiwis back to their pre-crash incomes, you can read about that here.

There is a new KiwiSaver account with the Reserve Bank to help with the cost and to keep the economy growing.

You can also get more information about KiwiPension here.