The realities of means-testing the pension

Sunday, 3 May 2026

Kelly Dennett is assistant editor of The Post and Sunday Star-Times.

OPINION: The superannuation issue quietly entered the room again this week.

To be fair, it never really left, but you might have missed the latest development between the Maiki Sherman headlines, media naval gazing and more coalition government bust-ups.

But on Thursday Opposition leader Chris Hipkins returned to more pressing matters - the elephant in the room come Budget day later this month - also known as, what to do about superannuation.

Hipkins indicated he was open to means testing the pension, adding that he didn’t think raising the age was fair on the over 65s who were physically unable to, or found it difficult, to work. But he did say political consensus was needed.

Just a few weeks ago Prime Minister Christopher Luxon visited a retirement village in Amberley and reiterated that raising the age to 67 would help with costs (National campaigned on raising the age), and that the party would have more to say on the issue soon.

This year’s election, and any going forward, will prove crunch-time for superannuation, as the scheme approaches an annual cost of $29 billion by 2028/29.

More Kiwis lean towards means-testing as the solution, at least according to the results of a Freshwater Strategy/The Post poll we published last year, which indicated 43% of those surveyed preferred a means-testing approach, compared to 26% who said raise the age (15% preferred to do nothing, and 8% went for raising taxes).

Hipkins this week couched means-testing in the same way you generally hear the issue being discussed at the pub: that, reasonably, we feel uneasy about people earning six figures and who presumably have no need for it claiming the pension.

When I previously asked experts about whether true fairness could ever be reached, there was disagreement about the breadth of the “European River Cruise cohort” as then Retirement Commissioner Jane Wrightson called them then. The very well offs were in limited numbers, she said - the commission’s research from 2024 showed there were about 50,000 people over-65 earning six figures while also claiming the pension.

Meanwhile, economist Susan St John told me the number of over-65s who owned an expensive home and earned a good wage made up a “sizeable” group.

And therein lies the rub - who is considered well off will continue to be a point of conjecture. You’d certainly get a different answer from everyone you asked on the street.

With that in mind, how clearly do we understand the dent means-testing could make on super payments?

In Australia, the Government will assess both your income and your assets when assessing your pension eligibility, and whichever produces the lowest pension is the one used.

A single pensioner can only earn AU$218 a fortnight - or the equivalent of NZ$132 a week - before they are tested, after that the pension reduces by AU$0.50c for every additional dollar earned. A couple can earn AU$380 a fortnight combined (NZ$463).

Under the assets test, homeowners and non homeowners are tested differently. For single homeowners whose assets, not including their family home, are worth more than AU$321,500, and couples whose assets are worth over AU$481,500, the pension reduces by $3 a fortnight for each $1000 by which assessable assets exceed the lower threshold.

In New Zealand terms, that’s $391,000 for single homeowners or $586,000 for couples (again, not including the family home). For renters, their assets would have to be less than NZ$705,000 or NZ$901,000 to escape means testing - this sounds like a lot, although some “how much do you need to retire” estimates suggest $1m for a choices lifestyle is about right.

Assets include savings, shares, or property not classed as the family home, but mortgages are deducted from the overall asset value.

As an experiment, I used an Australian calculator to estimate how means-tested deductions could apply to a Kiwi pensioner. The example I used is obviously simplistic and takes into account current currency conversions, but not other supplements or benefits people might be entitled to.

For instance, a single homeowner who has spent their life paying off their mortgage, and is still working 40 hours a week on the minimum wage in order to boost their retirement nest egg, which stands at $100,000, would receive a pension equivalent to NZ$681 a fortnight (the current payment for single over 65s in NZ is $1294 a fortnight), one calculator suggests.

Are we ready and willing to apply the same means-testing rigour, if not more severely in order to make the proper dent it needs, here?

What do you think? Email sundayletters@stuff.co.nz. Please include your full name and address.