Superannuation eligibility will be raised from 65 to 67 in 2040, the Government has announced.
The changes will be phased in from July 1 2037, and will not affect anyone born on or before June 30 1972.
Everyone born on or after January 1 1974 will be eligible for NZ Super from age 67.
The residency requirement for eligibility for NZ Super will also be changed, from 10 years to 20 years.
The change will apply to people arriving in New Zealand after the legislation is passed.
Prime Minister Bill English made the announcement on Monday afternoon, and it will be legislated for in 2018.
"New Zealanders are healthier and living longer so adjusting the long-term settings of NZ Super while there is time for people to adapt is the right thing to do," Mr English says.
Funding superannuation currently costs about 5% of GDP, compared to an average of 9% across OECD countries.
This cost is expected to rise to 8.4% of GDP by 2060 at the current eligibility age.
Former Prime Minister John Key refused to touch the issue during his eight year term, and promised to resign from Parliament before he'd raise the retirement age.
Superannuation currently costs the country $30 million a day, according to Retirement Commissioner Diane Maxwell, and that'll blow out to $288 million a day by 2050.
Speaking to The AM show on Monday morning, Ms Maxwell hoped that the Government's announcement would include:
- gradually raising the age of eligibility to 67, preferably by 2035
- requiring immigrants to live here for 25 years before they're eligible, not 10
- investing the savings in helping people in their 50s retrain and upskill
On Three's The Nation at the weekend, Mr English said there was room for change in the superannuation scheme, then backpeddled, saying "you'll have to wait and see".
NZ First leader Winston Peters said on Tuesday that the party would refuse to form a Government with National if it increased the retirement age. Mr Peters wants the age to remain at 65, it's one of his bottom lines going into any post-election deals.
Superannuation: the current cost:
2017: $11 billion a year
$30 million a day
2027: $20 billion a year
$55 million a week
2037: $36 billion a year
$99 million a week
Source: Retirement Commissioner
With Māori life expectancy rate lower than that of the general population, the Māori Party wants Māori and Pasifika to be exempt from any increase.
Labour advocated for raising the age to 67 at the 2014 election, but dropped the policy after Andrew Little took over as leader.
United Future advocates a flexible policy, which guarantees superannuation at 65 but allows people to take a lower rate from 60 or a higher rate from 70.
The policy would also make KiwiSaver compulsory.