Labour leader Chris Hipkins says there’s big questions for us as a country about how we fund superannuation in the long-term, but raising the age of eligibility isn’t one of those questions.
His comment comes after a panel discussion at the New Zealand Economics Forum in Hamilton last week, where the panel spoke about whether the system could keep up, the age of retirement, life expectancy, and potential tweaks and their impacts on the economy and future generations.
Facilitator and former politician Steven Joyce, ANZ chief economist Sharon Zollner, Milford Asset Management chief executive Blair Turnbull, Barrister and former politician David Parker, and Aged Care Association chief executive and former politician Tracey Martin made up the panel.
Part of the panel's discussion was about how the retirement age would need to be raised to 72 or 73.
When asked about this on Monday, Hipkins told reporters he was concerned about “an arbitrary raise” in the retirement age.
“It would potentially cause significant hardship for New Zealanders who can’t work beyond 65,” he said.
“In some cases they can’t find work, in other cases their bodies just aren’t up to continuing to do the work they’ve been doing if they’ve been working in physically demanding jobs. By the age of 65, they’ve earned their retirement and they deserve to be able to retire.”
Treasury
Treasury’s most recent forecast finds that the number of people receiving superannuation in New Zealand will grow from 928,000 in 2024/2025 to 1,084,000 in 2029/2030.
At the same forum last week, Treasury secretary and chief executive Iain Rennie said the growth was equivalent to the entire population of Tauranga in just four or five years.
“The extra superannuation in 2029/2030 of about $7.7 billion compared to 2024/2025 is equivalent to 22% of the growth in the entire tax revenue that we are projecting over that period.”
Rennie said issues about superannuation are not just issues about the future.
“They are part of the chill headwinds that are confronting the government now and certainly whoever will be [in] government in the next parliamentary term."
When it comes to productivity, Rennie said New Zealand was creating skilled people.
“The challenge appears to be on the demand side. We may not have enough frontier firms operating at the levels that can fully utilise advanced skills.”
Rennie said this creates a fiscal challenge as skilled people spend most of their productive years overseas. And when we look at productivity distribution, New Zealand’s frontier firms - the top 10% - aren’t as productive as those in comparable economies, he said.
“New Zealand’s distribution is relatively flat and stable, indicating our frontier firms are not driving productivity growth.”
Borrowing on a credit card
During the panel discussion, Parker said when it comes to changing superannuation settings, the most important ambit is its relationship to productivity.
“We’ve got to be very careful to separate the political debate on the age of eligibility from the productivity debate, which for me is grounded in savings and investment.”
Parker said he saw no credible way forward for New Zealand to lift its productivity unless we matched the Australians and their better savings rate.
When asked about the age of superannuation, Turnbull said New Zealand couldn’t afford to have superannuation at 65 or at 67 - an age some political parties have floated moving it up to.
“Treasury are very clear, unless it goes to like 72 or 73, we can’t afford it,” Turnbull said.
“So it’s slightly rhetorical but with that said, it’s inevitable that we will have to address the age of eligibility and we’ll also have to address some form of means testing it.
“We have to be very thoughtful about it, we’ll have to signal it, but we will have to do that because we are simply borrowing on a credit card if we don’t.”
Turnbull said the bigger crux of this issue is at the heart of the productivity issue.
“How do we develop as an economy to have better productivity, to pay higher wages, to enable people to save, to develop private savings [and] not feel like it’s a salary sacrifice when you put into KiwiSaver but you actually really start to enjoy and appreciate the value of your KiwiSaver and develop your private savings.”
He said New Zealand did need to address some of these shortfalls.
Parker agreed with Turnbull, saying changing the age would not fix the problem.
“I think we would all agree here that we’ve got a productivity problem. What else are you going to change to improve productivity? This is the biggest lever,” Parker said.
“And it also provides you with a path to a gradual transition, whatever your age of eligibility.”
Parker said he did not think means testing was the answer however.
“What do you do when someone’s got lots of assets and no income? How’s that fair?”
Parker said: "What do you do if someone's got a multi-million dollar house? You can't eat it. So you actually find means testing doesn't kick up much money."
Parker suggested all or part of workplace savings could get put into annuity when people reached retirement age or earlier. "There's different ways you can do it."
“You’ve got a lot of flexibility then and start to abate your way out of the silver tsunami,” Parker said.
Zollner said age was not irrelevant but it’s not going to solve the problems on its own.
“It probably needs to be part of a package … Raising the retirement age, unless you’re going to go to 72 or something isn’t going to solve it.
“It’s really actually moving the indexing from the wages to CPI inflation and therefore, it grows more quickly.”
Zollner said there was a group keeping up with the cost of living but falling behind everyone else.
“There’s some quite scary statistics in terms of how they would end up. The proportion would end up living on less than half of the median wage. But the counterargument to that is that wages and the standard of living should have increased over that time.
“So you’re not talking about an absolute fall in their standard relative fall but that’s the lever that really moves the dial. That’s no less politically toxic than the age.”
Zollner said means testing could work but it could dramatically reduce the labour force participation rate for people over 65.
“It might actually end up costing you money to work and the evidence is that working beyond 65 keeps you young, keeps you engaged, keeps you socially engaged in the community. So there’s costs there that are maybe harder to measure but real.”
Change
National’s policy at the last three elections has been to raise the age of superannuation - with its proposal to keep the NZ Super age at 65 until 2044 and then it will be gradually bumped to 67.
ACT also supports lifting the age to 67.
In December, Prime Minister Christopher Luxon told reporters National would have “more to say about that” but the party had a “very consistent policy in the last few elections about lifting the age from 65 to 67”.
Luxon said National was not up for changing NZ Super itself because the party wanted people to have certainty.
Luxon said they constantly will be reaching out in a bipartisan way but Labour and other political parties had a “very strong aversion to lifting it from 65 to 67”.
ACT Party leader David Seymour said every other country was changing the age of entitlement to superannuation.
People are living longer and having fewer children than taxpayers did in the 1960s for example, he said. “You’re going to have to have a change.”
New Zealand First wants to keep the age of superannuation entitlement to 65. “No ifs, buts, or maybes,” its policy on seniors from 2023 said.
Last Friday, The Opportunity Party leader Qiulae Wong told RNZ that her party would replace New Zealand Super, along with other forms of government assistance, with a citizens’ income which would be means tested.
The policy would be paid for by a land value tax and the savings made on replacing those other forms of government assistance, Wong said.
Election
With 2026 being an election year, KiwiSaver and retirement will be a contentious topic.
In November, the National Party released its first key election policy - that it would continue to increase contribution rates for employers and employees.
Additional increases would start from April 2029, rising by 0.5% per year until April 2032 - to a 6% contribution rate for employers and employees.
NZ First already announced its KiwiSaver election policy in September, proposing to increase employee and employer contributions to 10% and making KiwiSaver compulsory.
At the time, NZ First leader Winston Peters said KiwiSavers and employers would receive tax cuts to cover the increases.
26 Comments
When are they going to address the real problem of superannuation...the inability to provide the real goods and services needed for the retired population irrespective of funds?
Because the population is continuing to age, a blanket asset testing rule will disincentivise over 65s to continue working at time when they'll be needed most.
There needs to be a certain wage/salary ceiling that if below isn't asset tested. "Double dipping" keeps older people in work and is almost self funding once tax is deducted.
The reason they are still working is because they aren't old enough to require retirement. Changing the age is the better approach.
Not necessarily.
There are many who continue to work despite having physical and mental difficulties as they are not able to afford to retire. Superannuation alone is not currently sufficient to afford to live on . . . and this includes all the add ons such as accommodation supplement, social housing, rate rebate, community services card . . .
In Y2000 5% of people receiving super were still working, now 25%.
Yes, some through economic necessity, others because they enjoy the stimulation of work but I suspect a large % because the absence of a super surcharge/means testing makes it financially attractive. A policy misstep could cause a heavy loss of older workers, with serious implications including loss of tax revenue and physically replacing them.
Why can't the age be raised as we live longer? If we eventually live to average 200 years old then the state needs to pay out NZ super for 135 years per person? How is this possible?
We could have a special "old and knackered" benefit that kicks in at 65 (or even 60 if we wanted). But like all benefits it would be means tested and only available if you qualify. They could also make the Kiwisaver eligibility age different to NZ super age so you can save to retire early.
The average Māori male life expectancy is 73, which Treasury reckons ought to be the qualifying age for NZ Superannuation.
Think about that.
73 is a big change from 65. And I assume treasury would increase that over time, by that time Māori life expectancy will probably be much higher.
How do you think the age should be selected? What makes 65 the magic number?
Good question. Why is age even considered?
Yes a UBI would be a lot fairer and easier. Extend the current concept from "its simpler/cheaper to just give NZ super to everyone over 65" to "its simpler/cheaper to just give NZ super to everyone". Obviously this would involve high rates of tax when you do work, but there would be no need for a progressive tax system, top rate on every dollar because the UBI gives everyone a basic standard of living.
The challenges and costs of determining eligibility criteria such as 'old and knackered' would be considerable and divisively contentious. A key reason NZS is delivered at comparatively modest cost as a % of GDP is its universality of access.
Just a doctors certificate should do. And it would be asset and income tested just like the dole, so no real gain from faking it.
I have a lot of family that were manual labourers, always complained if anyone mentioned the age increasing, but then ended up working full time until 67+
Always ignored by all these movers and shakers is an obvious solution, or part-solution: to reimpose some form of the surtax on Super beneficiaries' other income that was abolished in 1998. That is the way to help ensure that NZ Super remains universally available, yet goes in full only to those who need it. Susan St John has proposed a way, but politicians (and fund managers keen to promote their KiwiSaver) all turn a deaf ear.
https://www.auckland.ac.nz/assets/business/about-the-business-school/St…
Only on income, or assets too? A billionaire that doesn't work gets full NZ super, while someone that owns nothing gets nothing because they keep working?
then there's the problem of an inevitable sharp reduction in the number of over 65's working. Zollner discusses this: means testing ....... could dramatically reduce the labour force participation rate for people over 65.
Yes, but the surtax need not be a flat rate. It could be stepped to encourage work, levied heavily on high incomes. Someone earning $30,000 a year has a better claim to getting some of their Super too than someone on $300,000 a year.
Agreed. What good is it accumulating assets across the lifespan if not to utilise this and sell down to free up equity to fund retirement. Too many with expensive large houses in core city areas claiming full pension and claiming they are asset rich and cash poor....and doing nothing about it as they don't want to sell up the assets, and want to keep their prime location as well as a good supplementary income. One who is asset rich cannot claim they are poor.
Logic suggests the surtax would be levied on the deemed potential income of all assets including the family home, as well as actual income from work.
However, as you can't eat deemed potential income, the Super might be paid in full but a balancing tax debt to the state accumulate, to be paid to the state on death or the sale of the assets.
You can, for example by downsizing or taking out a reverse mortgage. But yes I'm happy with your solution of paying back those welfare payments plus an appropriate interest rate after death.
It would get very complicated wouldn't it. Trusts / gifts / etc.
May as well charge everyone for their super after death...
Great idea, Inheritance tax up to the value of super received. The government is just helping out with cash flow and stability for those who are wealthy enough to support themselves.
The UK has a system where gifts are treated as part of the estate for inheritance tax purposes if given within 7 years of death. Trusts could get a little tricky but surely not beyond us to figure that out.
I'd be happy with that too, not sure why there is so much appeal to dying with lots of stuff.
“How do we develop as an economy to have better productivity, to pay higher wages, to enable people to save, to develop private savings [and] not feel like it’s a salary sacrifice when you put into KiwiSaver but you actually really start to enjoy and appreciate the value of your KiwiSaver and develop your private savings.”
You don't. The resources are getting less and less abundant to allow for this. Precisely why the boomers had the lucky timeframe where there was less regulation, more native forests to rip out, more oil to be extracted, easier to access ore for metals, more available land to exploit and build on, and a time of relative global peace historically allowing for innovation and global trade expansion. Not a generational jab BTW, just an observation
These resources are not around in such abundance for everyone to enjoy anymore, and it is showing. Laminated pine timber for structural beams now as the main hardwoods have been felled (the rest protected in National parks thank goodness), Increase in Steel prices, concrete prices, you name it.
Ditch National Superannuation completely. There is a better way to do this.
I think this topic is far more complicated than everyone thinks.
There is always talk of means testing those that do work, but that would be very unfair without including assets, and then it gets very difficult (and expensive to implement).
Where does Kiwisaver fit into all of this? Is it just going to be a topup? Will current taxpayers be happy paying tax for NZ super when almost every retiree has millions in Kiwisaver (at 12% of income)?
How can we claim 65 is the correct age when people are living longer and doing less manual labour? Surely it has to change at some time?
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