Category Archives: NZ Super


Report on NZ Superannuation by the NZ Initiative Group

This group based in Wellington are a “think Tank” which looks at future proofing issues. They came into being from the old business round table group, do they have a conservative business lean ? Not sure about the link to the health statistics, I don’t believe they are robust enough, specific or up to date enough  with current research. While 65 is an arbitrary age, it is in the public mindset and financial thinking. Reading this article one can easily conclude, no system or model is perfect, but New Zealand  may have got it close to right.

The New Zealand Initiative is a public policy think tank and business membership organisation. Based in Wellington, New Zealand, this non-partisan think tank was formed in 2012 from the merger of the New Zealand Business Roundtable (NZBR) and the New Zealand Institute.[1] The Initiative acts as a conduit between the different levels of government, the business sector, and the people of New Zealand. The Initiative’s main areas of focus include economic policy, housing, education, local government, welfare, immigration and fisheries.

Economist Dr Oliver Hartwich is the executive director of The Initiative.


Jenesa Jeram
4 December, 2018

New Zealand is one of a handful of countries to offer a universal non-means-tested benefit, payable from the age of 65 until death.

Commentators insist that with an ageing population, New Zealand Superannuation (NZS) is unsustainable. There are rising concerns that New Zealand is sitting on a fiscal time-bomb, and that urgent reform to NZS is needed.

Contrary to the doomsayers, this report offers a more positive story. Not only is NZS arguably one of the best pension models in the world, but the best evidence does not point to a looming fiscal crisis.

Any changes to NZS ought to preserve the best parts of the model, while ensuring NZS adapts to a changing environment.

There is a lot to like about the NZS model:

  • Low poverty rates: The material hardship rate for the elderly is low compared to other groups in New Zealand and is one of the lowest compared with European countries. The standard hardship rate for superannuitants is 3%, compared with 11% for the whole population and 18% for households with children.
  • Relatively affordable: NZS is more affordable than public pension schemes in many OECD countries, both today and in 2050. At around 8% of GDP, the projected public expenditure on NZS in 2050 is still lower than what many OECD countries are spending today. These include oft-acclaimed systems like in Denmark, Finland, Norway and Sweden.
  • Simple and efficient: NZS does not distort incentives for employment and savings as much as means-tested systems. When an NZS surcharge was introduced from 1985 to 1998, people went to great lengths to avoid paying it by hiding their assets. The simplicity of a universal benefit also lowers administrative costs.
  • Safeguard against debt: The Public Finance Act 1989 is a safeguard against the spiralling debt seen in other countries with ageing populations. If governments were not required to manage prudent debt levels, debt financing costs alone could rise from 1.6% of GDP in 2015 to 11% in 2060.

The sky is not falling

• The cost of NZS will rise from around 5% of GDP in 2015 to 8% in 2060, but that does not necessarily mean that NZS (even NZS at current settings) is unaffordable.

• Changes will need to be made to spending and/or taxes but the size of the adjustment is not yet known.

• Expected tax revenue is still unknown, including future taxes paid by superannuitants. Premature tax increases to address the future fiscal burden can cause harm if policymakers get the estimates wrong.

• There is still uncertainty regarding future social expenditure, ranging from 22.5% of GDP to 35%. Much of this uncertainty is due to unknown future unemployment rates, labour force participation rates, and productivity growth.

• Future rates of productivity growth are not only unknown, but also have a significant effect on the affordability of NZS and every other component of government spending.

Taxing the working poor to pay the relatively wealthy

• Just because we can afford NZS now does not mean it will be the best redistribution of resources in the future.

• Unnecessary increases in taxes could cause harm, as could cuts to essential public services.

• In the face of ageing voter demographics, governments will face more difficulty convincing the electorate to make changes to NZS.

• Public spending on NZS could increasingly become a tool for regressive redistribution, transferring funds to the relatively well-off. The opportunity cost must be considered where other groups face greater hardship and/or need.

• According to one calculation, by 2060 the net fiscal impact of having more net recipients of public spending (predominantly superannuitants) than net taxpayers, could be around negative $15 billion.

• Changes to NZS should preserve the best parts of the model, while ensuring that NZS does not distort the welfare system’s overall progressive redistribution.

Recommendation 1: Link the pension age to health expectancy

• The efficiency of NZS relies on the assumption that the pension age and actual retirement age are closely linked. But the pension age has not adjusted for people living longer and staying longer in the workforce.

• The pension age should rise, but a one-off rise that with a long lead-in time is likely to already be out of step with labour force trends by the time it is implemented.

• Linking the pension to health expectancy gives flexibility for future adjustments.

Recommendation 2: Index NZS to CPI only rather than both CPI and wages

• NZS is indexed to both inflation and the average ordinary time wage. Decoupling NZS from rises in wages is a way of ensuring productivity gains reduce the costs of NZS. The real purchasing power of NZS should remain the same while the real purchasing power of wages would increase.

• This report makes this recommendation with the assumption of continued real median wage growth, which is why this report also recommends focusing on productivity growth.

• Though the benefits of enhanced productivity growth will not be shared under this setting, it is down to value judgments to determine whether NZS should provide for these enhanced benefits or whether private savings should be expected to fill this gap.

Recommendation 3: Contributions to NZ Super Fund should not be at the expense of paying down debt

The Super Fund should not be relied on to reduce the future costs of NZS (it cannot do that), and contributions to the Fund should not come at the expense of paying down debt.

Recommendation 4: Productivity growth will make NZS – and everything else – more affordable

Faster rates of productivity growth relative to increases in the real interest cost of government borrowing can allow increased government spending without falling into a public debt spiral. Raising productivity growth is a way of making NZS (and everything else) more affordable, and gives future governments more options and flexibility to adjust to changing economic and political circumstances.

Not a new problem, not a bad problem

Since its inception, the New Zealand public have debated the purpose of the public pension and who should receive it.

Policies today cannot bind the taxpayers of 2060. Ultimately, the taxpayers of 2060 will vote on the pension system they prefer and can afford.

But signalling small changes that can make a measurable difference, and signalling these changes well in advance, increases the likelihood that the policies made today will stick.

Click here to download the two-page summary of Embracing a Super model: The superannuation sky is not falling.

About the author
Jenesa Jeram is a Research Fellow at The New Zealand Initiative focusing mainly on social issues, welfare and lifestyle regulations. Since starting at the Initiative as a research assistant in 2013, Jenesa has written and co-authored many reports on a range of topics. 

She has a Bachelor of Arts with first class Honours from the University of Otago, majoring in politics, philosophy 

No frills retirement plus!

Research out of Massey University, NZ. The costs of retirement!

Most people in NZ apart from the educated few, have no choice but to try and find work as they anticipate retirement. NZ Super keeps them above the poverty line, but life challenges, including financial meltdowns, marriage breakups, no discretionary income at any stage, takes away the choice element for most!

Posted by Alec Waugh

The case against Raising NZ Superannuation age of entitlement

This 2017 article is a timely reminder re both the substance and complexity of New Zealand Superannuation. Contains some excellent references,  and always be aware of the single issue commentator and those who adopt crisis rhetoric on the topic. Its a worry when you hear Larry Williams, Mike Hosking, Heather du Plessis Allan and Cameron Bagrie talking on this  and similar issues. Limited knowledge and loud voices!

Here is hoping the Retirement Commissioner is developing an extensive body of knowledge on the topic she and her team must be research experts on NZ Super and comparative analysis  details, aware of what’s sound and what’s unsound in OECD countries , Chile, Scandinavian  and similar.


Posted b y Alec Waugh 6 July 2018

Kiwi Saver: New Zealand Superannuation: The New Zealand Superannuation Fund

Can someone please explain the difference between KiwiSaver, The New Zealand Superannuation Fund and New Zealand Superannuation?

KIWI-SAVER was introduced by the Government in 2007 to help New Zealanders save towards their retirement. To help you save, the Government will make an annual contribution towards your Kiwi Saver account (member tax credit) as long as you are a contributing member aged 18 or over. Member tax credit ceases when the member reaches the age of eligibility for NZ Super (currently 65) or has been a member for 5 years, whichever is the later. To get the full member tax credit automatically “you” have to contribute at least $1,042.86 a year

Employees: You can choose to contribute 3%, 4% or 8% of your before-tax pay. If you don’t choose an amount, the default rate of 3% will apply.


If you’re not an employee – for example, you’re self-employed, a contractor, not working or receiving a benefit, then your contribution rate will be set out in the contract you have with your Kiwi Saver provider. There may be a minimum annual sum, or specific payment periods that apply, such as monthly or quarterly.

“Individuals can start a Kiwi Saver account in their own name and take it with them from job to job. “Kiwi Saver is not guaranteed by anyone, including the Government.

“The Government is responsible for setting the rules and regulations for providing a Kiwi Saver scheme. “Providers are supervised by independent trustees and the Financial Markets Authority exercises continuing oversight of the schemes.

Oct 24, 2013 – In the report the Retirement Commissioner acknowledged that while private savings, including Kiwi-Saver, will play an increasingly strong part of people’s retirement income, these should be a supplement rather than a replacement for NZ Superannuation’s modest payments.

NEW ZEALAND SUPERANNUATION (NZ SUPER) is the government pension paid to Kiwis over the age of 65. Any eligible (if you receive an overseas pension, this is important) New Zealander receives NZ Super regardless of how much they earn through paid work, savings and investments, what other assets they own or what taxes they have paid. NZ Superannuation is taxable income

THE NEW ZEALAND SUPERANNUATION FUND (NZSF) was established in 2003 to help pay for the future costs of superannuation entitlements.

Estimated to cover about 10% of future costs and to reduce the tax burden on future New Zealanders for the cost of New Zealand Superannuation

The NZSF invests money on the Government’s behalf and the fund is managed by a crown entity – the Guardians of New Zealand Superannuation

Posted by Alec Waugh 1 February