The Retirement Commissioner is calling for cross-party action when it comes to New Zealand’s retirement system, saying we need to stop “piecemeal policy change.”
“More New Zealanders are living longer, working differently, and facing new pressures around housing and caregiving,” Retirement Commissioner Jane Wrightson says.
“These shifts mean we need to continue to check that the system is doing its job, and make improvements where it isn’t."
Wrightson’s comments come as Te Ara Ahunga Ora Retirement Commission released its Review of Retirement Income Policies 2025 on Friday.
The Commission is required to undertake a triennial review of retirement income policies and provides the Government with independent advice on how these policies are going - and what changes may be needed.
As part of its review, the Commission estimates the Government would spend $545 million on KiwiSaver subsidies in the 2025/2026 financial year - this is how the Commission looked at ways to target government contributions to offset the costs of implementing its proposed KiwiSaver reforms, assuming no extra funding is available.
Wrightson says the message is clear.
“We need a long-term political accord to focus on providing certainty for future generations of retirees and stop piecemeal policy change. That means improved governance, inclusive policy and a retirement income system that works for everyone.”
This includes the development of a 10-year roadmap for the retirement system which Wrightson says would be a plan that extends beyond political cycles and takes into account “multiple lenses, not just fiscal.”
“Decisions, such as whether to change the age of eligibility for NZ Super or make KiwiSaver compulsory, cannot be made without considering the system as a whole," Wrightson says.
The current system
The report says while New Zealand’s current retirement system is strong - the world is changing.
Over the next 10 years, half a million KiwiSaver members will reach 65.
“The current debate about retirement income is too narrow. It often overlooks the diverse experiences of older New Zealanders and does not fully account for how retirement outcomes vary by gender, ethnicity and employment type.”
The report says today’s policy settings are not set in stone. “Future generations will face different challenges and opportunities.”
What's changed
There’s rising financial stress among older people with the report saying research has shown many people are concerned about living costs, housing security and whether NZ Super is enough to meet their needs.
Currently NZ Super after tax is about:
- $1076.84 if you live alone or with a dependent child
- $994 if you live with someone who is either 18 or older or visiting and staying more than 13 weeks in any 26 week period
- $828.34 each if you and your partner meet the NZ Super criteria
- $828.34 if between you and your partner, only one of you meets the NZ Super criteria
(These numbers are with the M tax code and would change if you're on a different tax code such as S, SH, ST and SA).
The report says while 56% of New Zealanders feel financially comfortable or very comfortable, 32% feel financially exposed and a further 12% say their situation is financially poor.
This highlights a growing diversity in retirement experiences, the report says.
Alongside this, a growing number of older people who are over 65 are staying in the workforce.
The report says nearly half of people between 65 to 69 are in paid work compared to 15% at the start of the century.
Housing security has also changed.
“The ‘golden assumption’ of home ownership, based on the idea that most New Zealanders would retire mortgage-free, has broken down.
“This shift highlights the importance of housing security for older people,” the report says.
The proportion of people who own a home mortgage-free has decreased from 83% in the mid-1990s to 71% in recent years.
“Around 13% of older adults are still paying a mortgage, and a similar proportion are renting.”
Among people aged 45 to 64, renting has doubled since the 1990s (going from 10% to 23%) while mortgage-free ownership has fallen from 60% to 32%.
“This points to a future cohort of retirees who are more likely to enter retirement with ongoing housing costs, increasing the risk of financial stress.”
Gaps in the system
Groups such as women, Māori, Pacific Peoples, low-income families and the self-employed face distinct challenges, the report says.
“Addressing these disparities is not just a matter of fairness, it is central to the system’s long-term effectiveness."
“NZ Super continues to play a vital role as a universal, inflation-protected income that provides stability and security for all older New Zealanders, particularly those with limited private savings.”
The report also points out that people over 65 and those on temporary visas are treated differently to other employees.
“People on temporary visas are excluded from enrolling in KiwiSaver, and employers do not have to make KiwiSaver contributions to employees after the age of 65.
“This limits the ability of older workers and migrant workers who ultimately settle here to build long-term wealth.”
The report says: “As KiwiSaver becomes a larger part of the retirement income system, differences in saving will matter more. People with smaller balances will have less to draw on in retirement, potentially widening income gaps among older New Zealanders.”
Sustainability and fairness
The report says the system is connected to broader questions of intergenerational equity.
“This reflects the structure of the welfare state, which redistributes resources across the life course by supporting the young through education, the elderly through superannuation and health services, and everyone through shared public goods.”
The report refers to fiscal incidence analysis showing that older New Zealanders are “significant net recipients of government spending, while working-age adults are not contributors”.
“In 2019, the 65-79 age group received over $8 billion more in government services than they paid in taxes, and the 80+ group received over $5 billion more."
“These net transfers are largely driven by NZ Super and health spending, which are concentrated in older age groups.”
The report says this redistribution is not inherently unfair but it raises questions about sustainability and fairness between generations, “especially as demographic pressures grow”.
“In recent years, governments have returned to running fiscal deficits. This means that instead of passing on a stronger balance sheet, current policy settings are now shifting more of the cost burden to future generations,” the report says.
“The ‘implicit debt’ created by current pension policies, especially the growing cost of NZ Super, will require future taxpayers to fund a larger share of retirement income and aged care.
“This could result in higher taxes, reduced public services, or increased debt for younger and future generations.”
The report says economic growth through improved productivity could help ease fiscal pressure.
“A stronger revenue base gives governments greater capacity to meet rising costs such as NZ Super and healthcare, without resorting to higher taxes, reduced services or increased debt.”
It also creates “fiscal headroom”, the report says, enabling governments to maintain current NZ Super settings, invest in public services and support internationally competitive tax rates.
“It also strengthens the system’s resilience to economic shocks and demographic change.”
But the report also points out that productivity growth won’t automatically reduce retirement costs, especially with NZ Super indexed to wages.
Actions
The review report provides a “practical plan for action for improving New Zealand’s retirement income system”.
The report says actions can be taken when it comes to targeted policy reforms through reallocation of existing spending on the government contributions.
These are:
- Extend the KiwiSaver parental leave government contribution to $1000 regardless of whether the member makes contributions
- Increase KiwiSaver government contribution for low-income earners
- Remove unnecessary KiwiSaver exclusions, mandate employer contributions for people over 65 and allow those on temporary visas to join KiwiSaver and receive matched employer and government contributions
- Ban the use of total remuneration policies in KiwiSaver employer contributions
When it comes to system improvements and innovations, actions the report says can be taken now are:
- Work with KiwiSaver providers and supervisors to enrich the regular, anonymised reporting of balances, contributions and withdrawals (including hardship) and improve integration with other administrative data sources
- Improve KiwiSaver administrative processes including standardising and optimising hardship withdrawals, and update payroll systems to better support employer contributions during parental leave
- Design and trial emergency savings accounts
- Develop a nationally consistent decumulation framework
“The review also recognises that lasting progress depends on more than just short-term fixes,” the report says.
The Retirement Commission is calling for:
- A new retirement income cross-party accord put in place
- The establishment of a Parliamentary working group to set the strategic direction for a 10-year retirement income roadmap
- The establishment of a pan-sector group, led by the Retirement Commission, to develop and implement the roadmap under the guidance of the Parliamentary group
- The 10-year retirement income roadmap to address KiwiSaver, NZ Super and innovation in retirement planning
“Some decisions, such as whether to change the age of eligibility for NZ Super or make KiwiSaver compulsory, raise significant questions,” the report says.
“We do not support making these changes before the long-term plan is developed. If and when they are considered, a careful approach is crucial to ensure public trust in the retirement income system is protected.”
Wrightson says the problems identified in the review won't go away.
“It is crucial that the political leaders of today work together on long-term solutions.”
“These actions are designed to improve adequacy, close savings gaps, and ensure the retirement income system remains fair, sustainable and trusted,” Wrightson says.
12 Comments
KiwiSaver can only ever be the 'nice to have' for those who throughout their working lives have surplus dollars left over after paying for today's living expenses that they can put in their KiwiSavers for the decades hence.
Many people cannot.
The answer to providing an adequate and dignified retirement for everyone, including the non-saving poorest, is threefold:
1. NZ Superannuation needs to be restored for a retired couple to a net 80% of the after-tax average wage;
2. All health care must become free, accessible, and timely;
3. The destruction of state and council income-moderated rental housing must be reversed. Within a couple of decades half of all retired people will be renters. The state must provide affordable housing for them.
Clearly, the present Government will do none of these things. So don't worry about desperate people dipping into KiwiSaver, just change the Government.
"The problem with socialists is they eventually run out of other people's money" Maggie T
Then what?
We can all move to Aus while we are young and save for our own retirement while not being taxed for other's retirement, then move back to NZ again when we are old for gold plated taxpayer provided super. What could go wrong...
What's the answer to paying for those changes? I'd suggest pushing out the retirement age, means/asset testing for super payments, and an inheritance tax as a start.
How do you means/asset test though? Let's say Joe gets to 65, worked a manual job all his life, his body is knackered. All Joe owns is his family home valued at $1.5 mil. Is he eligible for NZ super? The guy is a fricken millionaire, so I suspect not.
I'd make the age 70, and have a system where you can get paid NZ super early (65) from your Kiwisaver if you have enough funds to cover it. Also have a special benefit for those that can't physically work past 65 and don't have enough Kiwisaver, but you would need a doctors note.
Also make Kiwisaver compulsory.
Plenty of details to quibble about for sure. I'd expect more of a sliding eligibility scale rather than a hard cut off, so I'd expect your manual labourer to still receive some super.
I think really for those who are rich in terms of their main home and not much else, there should be an option for super to be paid with the government taking a corresponding stake in the property to be paid off when it is sold out transferred. Any particular large main home exceptions just created a bad incentive for retired people to stay in as large a house as possible for tax purposes, which may not be good for them and is definitely bad for society.
Do you end up with a system where you are better off retiring with nothing? Where saving for retirement is pointless and considered a stupid thing to do?
Sell everything you own at 64, give it to your kids on the condition they look after you for the rest of your life, then live a decent life off the state.
Yeah, the leakage and loopholes are a problem. Personally I would prefer my current trajectory to owning nothing at 65 and relying on super forever but that won't be the case for everyone.
Perhaps it's easier to settle for means testing based on income, and a well policed inheritance tax to claw back some of those benefits from those who never really needed them.
"Groups such as women, Māori, Pacific Peoples, low-income families and the self-employed face distinct challenges, the report says."
That doesn't make sense. Māori and Pacific Peoples do (possibly) get a shit deal as they don't live as long, but women live the longest and do much less manual labour. Its like they have to find an unfairness even when there is none, and if it is ever unfair on men / white people, that cannot ever be considered.
And since when has a government handout ever been fair? Its about giving assistance to those who need it, and in this case the longer you live the longer you need it.
That's actually pretty funny. All those groups added together come out to about 65-70% of the population.
I think the current system is fairly good. The government provides a safety net amount so that everyone gets a reasonable standard of living, and on top we have Kiwisaver which allows us to save for a better retirement ourselves.
The only real issue is the eligibility age, where many people get paid super just because they have met an arbitrary age even though they are capable of working, and we aren't increasing that arbitrary age enough as people are living longer. I do wonder about some kind of "manual labour" based retirement age. It obviously wouldn't be an easy thing to determine, maybe you do a self assessment of how many manual labour years you have worked and the government audits a percentage of them. For most people its pretty black and white, either you worked in an office all your life or you didn't.
This is all good, sensible stuff, but do any of the political parties have enough mature people who aren't wedded to adversarial win/lose thinking for anything to happen?
My personal vote would be for Superannuation age of entitlement being tied to how physical your working life has been: people like farmers, nurses, builders and the like do useful, heavy work that takes a toll on the body and for which there is no alternative.
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