Patrick Nolan says the steady compounding pressure of more NZ Super claimants per active worker needs to be addressed. Who pays more, how soon, and what other public services need to be adjusted?

By Patrick Nolan*

The cost of New Zealand Superannuation is back in public debate. In the Budget, Finance Minister Nicola Willis pointed to the rising cost of NZ Super, with annual spending expected to grow from less than $20 billion in 2023 to more than $30 billion by 2030.

Others have pushed back. They argue that NZ Super remains modest by international standards and is not expensive for New Zealand to sustain.

The result is a tangle of numbers. Depending on the starting point, the measure used, and the comparison being made, the situation can look like a crisis, a non-issue, or somewhere in between.

So, who is right?

The answer is that it depends. New Zealand could make the choice to keep NZ Super in its current form, but that would affect what else government can fund, how costs are shared, and who benefits from future spending.

Every extra dollar spent on NZ Super is a dollar that governments cannot use elsewhere. That does not mean the spending is wrong. It means there are trade-offs, including with health services, other income support, housing, infrastructure and skills.

These trade-offs will become more visible as the population ages.

The number of people aged 65 and over is projected to roughly double over the next 30 years, while growth in the working-age population is much slower. Over time, this reduces the number of people in paid work relative to those receiving NZ Super.

A simple way to see this is through the old-age dependency ratio. Today there are roughly four people of working age for every person aged 65 and over. Over the next few decades, that ratio will move closer to two to one.

This shift does not create a fiscal cliff, but it does create steady, compounding pressure.

Each year, more people become eligible for NZ Super, while demand for health services, aged care, and income support at older ages also increases. These pressures build together, not separately.

This means that even if each pressure is manageable on its own, the combined impact becomes harder to absorb without changes elsewhere in the system.

It also means choices made now have long-term effects. Decisions that look low-cost over the next few years shape the path of spending and taxes over decades.

Set against this backdrop, the question is not whether NZ Super is affordable in a narrow sense. It is whether current settings remain the best way to deliver income security in retirement as demographic and fiscal pressures build.

New Zealand could continue to fund NZ Super as it is today. But that would mean accepting choices about how quickly other spending can grow, how the tax burden is shared, and how support is distributed across the population.

Higher taxes could be one way to meet rising costs, but they do not remove the need for trade-offs. They shift it into questions about who pays more, how soon, and what other public services and investments those same taxes also need to fund.

This is why the 2025 Review of Retirement Income Policies argued for the need for a 10-year roadmap for the retirement income system, not a series of one-off decisions.

The roadmap needs to start by treating policy settings as not being fixed in stone. The age of eligibility for NZ Super, indexation rules, universality, and the role of KiwiSaver are all policy choices. The task is to decide which choices can be made now, which need more work, and how any changes can be phased in fairly.

In August, Te Ara Ahunga Ora Retirement Commission will release modelling to help with this task. It will show how different combinations of policy choices affect costs, retirement incomes, and outcomes for different groups of New Zealanders.

The goal is to help shift the debate from whether change is needed to what kind of change would be fair, affordable, and durable.

*Patrick Nolan is Director of Policy and Research at the Retirement Commission / Te Ara Ahunga Ora