Act now to get the future of NZ’s retirement system right
Sunday, 20 July 2025
OPINION: As New Zealand grapples with an ageing population and widening inequality, the need for a long-term look at our retirement system has never been more important.
How can we, as a nation, ensure that our people can retire with dignity, security, and peace of mind? With a safety net of state support plus solid private saving options to add to the pot.
We have a proud history of pioneering retirement income policies, from the first old-age pension in 1898 to universal NZ Super and then KiwiSaver. These choices reflect a deep public commitment to fairness and simplicity.
Read More on NZ Super:
While New Zealand’s retirement income system has strong foundations, not all groups benefit equally. Gender, income, and employment type shape retirement outcomes differently.
There’s rising pensioner poverty, and people without housing wealth or security are struggling. Our latest research has found that 39% of people surveyed were entirely dependent on NZ Super to provide them with an income and one in five are not confident they will have enough money to live on in retirement.
Yet 40,000 NZ Super recipients earn over $100,000.
Demographic shifts and rising inequality mean we must evaluate change now – and do so at a system level, not just tinker around the edges. This means NZ Super and KiwiSaver, the twin pillars of our system, need to be considered together, as changes to one affect the other.
NZ Super is universal, simple, and deeply valued. KiwiSaver is our long-term savings engine, the private provision that helps people build their own nest eggs to top up the pension.
By 2050, over a quarter of New Zealand will be 65 or older. The cost of NZ Super is rising – from 5.3% GDP to nearly 8% in the coming decades. However, that figure includes tax: the actual cost is forecast to be closer to 6.5% and even lower if you factor in tax paid by the NZ Super Fund.
Despite the value NZ Super brings to so many, the debate around affordability is often launched with an imperfect problem definition and a narrow range of possible solutions, like raising the age of eligibility, or introducing means-testing, without looking at the broader system.
KiwiSaver turned 18 this month, and for 2.2 million New Zealanders, it’s their primary source of private retirement savings.
It’s been a game changer for wage earners but balances are uneven, especially among women (men have a 25% higher balance on average), lower-income earners, Māori and Pacific Peoples.
And over the years there have been more negative changes (like losing incentives) to KiwiSaver than positive (like moving default funds from conservative to balanced). None of the changes were strategic.
The latest KiwiSaver policy changes to increase employee and employer contributions rates to 4% will have a positive impact on 80% of contributing members, but 20% don’t benefit.
The decrease in government contributions will mean low-income members are impacted more than higher income members as the contributions make up a greater portion of retirement saving.
Making a good system is a national issue, yet political debate is often fragmented, short-term, partisan and reactive. Changes aren’t made holistically and it’s unclear which minister is actually in charge.
We need hard long-term thinking on a range of options – including the thorny issues such as income testing – and public engagement on the trade-offs inevitably involved in reform.
The commission is shortly completing its triennial Review of Retirement Income Policies. This includes research and analysis to provide key policy recommendations for Government which take a long-term view.
We’re looking at questions like how to optimise retirement income policies for women at key points in the life cycle, such as parenthood, separation, or the death of a partner. And the emerging trends over the next 25 years.
We’re also investigating strategies that could help boost KiwiSaver contributions by the self-employed, the opportunities provided by iwi savings schemes, and how New Zealand’s pension policies compare with the likes of Australia and others.
New Zealand is in a relatively good position. By international standards, in the decades up to 2050, we will continue to have a relatively young population and government spending on retirement income policies will remain in the lower half of the OECD.
This means we should make the most of the time and space available to get any future reforms right.
So, there are three ideas that don’t require a miracle — just political maturity that will reflect very well on the politicians themselves. We need to:
1. Establish a legislated parliamentary cross-party group
Party leaders would nominate their most interested MP, plus an adviser, supported by the independent Retirement Commission as secretariat. Every 10 years the group would convene, consult, collaborate, agree, and report. This is a systematic way to consider competing tensions.
2. Agree on guiding principles
Parties may disagree on the details, but they can agree on core principles. For example:
Retirement income should be fair and adequate. Avoid pensioner poverty.
The system should be fiscally sustainable. Affordable.
Private saving should be actively encouraged. Attractive settings.
The system should formally be reviewed in this way every 10 years with no changes in the interim unless there is a crisis. Stability.
3. Report to Parliament with proposals for improvement
Legislative proposals can now be developed with confidence that there is broad consensus and that select committees can hammer out the final details. We’ve done this before.
In 1993, the Accord on Retirement Income saw parties agree on key principles for NZ Super. In 2007 the introduction of KiwiSaver had broad support, although we’ve seen different approaches by successive governments. But no one’s dismantled it. There’s a current cross-party group that looks at addiction issues.
These moments show that when the stakes are high, New Zealand politicians can rise above party lines.
When it comes to the retirement security of millions of New Zealanders - past, present, and future - political differences must not become roadblocks.
We need courage. We need compromise. And we need a shared vision that transcends party politics. Our representatives can do this.
What do you think? Email sundayletters@stuff.co.nz. Please include your full name and address.