The worrying graph about where NZ is headed financially
Friday, 14 November 2025
New Zealand has an ageing population, and we have runway of around 10 years to do something about it.
The Retirement Commission’s triennial report on the state of the sector features a graph showing that our old-age-dependency ratio is predicted to blow out significantly in the coming years.
The old-age dependency ratio measures the number of people aged 65 and over per 100 people of working age. The current data shows that for every 100 people of working age, we currently have 28 retirees, but these numbers are changing quickly.
By 2050, we’re looking at 38 retirees per 100 workers and by 2060, we’ll have twice as many retirees as today relying on those 100 workers.
In 2019, those older than 65 received $13 billion more in government services (largely through NZ Super and health spending) than they contributed in taxes.
This isn’t a bad thing. A country that looks after its elderly is a sign of a solid moral compass. But the broader question is what we need to do to ensure the system remains fit for purpose as our demographics change.
More of us are now working beyond the age of 65 and continuing to contribute, but this won’t be enough to meet long-term shortfalls in working age people.
The report notes that Governments have been running fiscal deficits for five consecutive years, which essentially translates into spending money we’ll earn in the future on today’s expenses.
The growing cost of NZ Super, in particular, will require future taxpayers to fund a larger share of retirement income and aged care. If this is not addressed through a comprehensive plan, it could result in higher taxes, reduced public services or increased debt in the future. All these factors could have an impact on our ability to grow enough wealth to see us through retirement once we get there. And they could also play a role in determining what our state pension looks like in the future.
Retirement Commissioner Jane Wrightson tells me this doesn’t have to be an impending disaster if the right steps are taken today.
“It gives us pause for thought to start thinking systemically,” she says.
“We've got a window of opportunity of about 10 years, during which we can plan ahead and start making the right changes.”
Do you feel wealthy?
We can already see the cost of getting this wrong. While 56% of older New Zealanders report feeling financially comfortable or very comfortable, a third feel financially exposed, and a further 12% describe their situation as financially poor.
The poverty rate for older New Zealanders rose from 10.6% in 2016 to 16.8% by 2020, moving above the OECD average of 14.2%.
Those may just look like percentages, but this country will soon have more than a million people aged 65 and older. If those statistics are maintained, we’re looking at 170,000 retired New Zealanders dropping below the poverty line.
It signals a growing need to focus on how New Zealanders build wealth over their lifetimes to ensure they aren’t left vulnerable in relying only on Super by the time they reach retirement age.
As societal demographics shift, these issues will only become more pronounced.
'Unfortunately, I suspect it’s set to increase because we'll have rising housing costs, lower homeownership over time, and there will be gaps in KiwiSaver,” says Wrightson.
Most people don’t work a tidy 40 years, saving consistently, from start to finish. Interruptions to building your retirement could include childcare, a divorce, health issues precluding you from work or a national crisis like leaky buildings – each of which is capable of knocking the steam out of your financial strategy.
So what needs to change?
The report delivers a series of 12 recommendations, providing a guide on changes that need to be made.
These include, but are not limited to:
- extending the KiwiSaver parental leave government contribution to $1000;
increasing Government contributions for lower earners;
banning the use of total remuneration policies (where employers build their KiwiSaver contribution into a total salary rather than paying it as an addition);
developing a nationally consistent decumulation strategy;
designing a sidecar or emergency savings account to limit KiwiSaver withdrawals;
putting in place a new retirement income cross-party accord;
and establishing a parliamentary working group to set the strategic direction for a 10-year retirement income roadmap.
Simplicity KiwiSaver founder Sam Stubbs says all the recommendations are sensible, but he feels they don’t go far enough to address what needs to happen to ensure that New Zealanders are put in the best position to accumulate wealth longer term.
“These are tweaks, rather than fundamental rethinks,” Stubbs tells me.
“The Commissioner has a seat with mana and is in a good position to address the real big issues, which are contribution rates and compulsion.”
Stubbs says a key way to put New Zealanders in a stronger financial position is by increasing contribution rates to ensure that our nest eggs grow over time.
“There’s a naive optimism which is to say NZ Super is so wonderful and we have to preserve it at all costs,” says Stubbs.
“I get that, but where's the money coming from?”
Treasury modelling forecasts that the cost of superannuation will grow at an average of 5.3% per year over the next 35 years, which runs well ahead of projected GDP growth.
The need for cross-party thinking
The report makes a clear call for politicians to work together on establishing a road map to develop KiwiSaver, NZ Super and innovation in retirement planning.
New Zealanders planning for retirement need consistency. They need to know what’s coming, so that they know how much they need to save for a sustainable retirement.
Rupert Carlyon, the founder of Kōura Wealth, believes cross-party collaboration could prove challenging.
“Our political parties seem to have very different views on what an appropriate set of retirement policies needs to look like,” he says.
“Even when we have had cross-party support for things, like climate change or the housing accord, they can be very quickly unwound… Unfortunately New Zealand retirement policies and KiwiSaver have always been subject to political point scoring.”
Like Stubbs, Carlyon also believes the ageing population is the elephant in the room that needs to be addressed.
“We need a full rethink of our superannuation and retirement system that ensures both fairness and financial sustainability,” he says.
Making sure we don’t burn through our savings
So much of the emphasis in retirement thinking is often placed on accumulation, but Fisher Funds' general manager of KiwiSaver David Boyle was pleased to see a recommendation on decumulation in the recommendations.
With Kiwis living longer than they did in the past, they need to ensure their money continues to work for them through retirement. You may be great at saving over the course of your life, but if you don’t have a decent strategy for spending that money by the time you get to retirement, you could eventually join the cohort of New Zealand retirees who say they feel financially strained in retirement.
Getting this right takes planning – and with KiwiSaver now approaching 20 years, many New Zealanders would have accumulated a decent nest egg they’ll gain access to as they retire.
“You wouldn’t decide at the airport where you're going to go for your holiday,” says Boyle.
“You’ve got to work out how long you're going to be away, the cost and what you’ll need to do to enjoy your holiday. It’s the same for retirement. The earlier we start looking at that, the better the outcome.”
The point Boyle makes here is an important one. While it will be critical to get the settings right to ensure New Zealanders are accruing enough wealth over their working life to support their retirement, we will also need a nationally consistent guide on the best way to spend that money once we reach that point.
None of these challenges will be easy to solve, but we could see some significant changes in the coming decade that will inform how we accumulate and spend our wealth in New Zealand.