Treasury Secretary Iain Rennie warns NZ Super incentivises graduates to leave
Friday, 13 February 2026
Treasury Secretary Iain Rennie says the nation’s superannuation system incentivises the best and brightest to move to other countries ‒ and that New Zealand will “probably” have to shift to a savings-based system eventually.
Rennie made the remarks in an interview with The Post at the New Zealand Economics Forum at Waikato University, where much of the discussion has revolved around the challenge New Zealand faces with an ageing population ‒ moving from seven working age Kiwis for every retiree in the 1970s to just two by 2060.
He laid out a need for Governments of all stripes to prepare New Zealand for the next fiscal shock, especially as the “peace dividend” of lower defence spending following the end of the Cold War appears to be well and truly over.
In an earlier keynote speech Rennie noted that a significant proportion of graduates do not stay in New Zealand.
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“Twenty per cent to 40% of our graduates leave the country, often in their peak earning years. This creates a fiscal challenge, as skilled people spend some of their most productive years overseas,” Rennie said.
In the interview, Rennie said part of the problem was that our “pay as you go” superannuation scheme ‒ where current taxpayers paid for current retiree benefits ‒ incentivised people to go to countries where they could build assets with “save as you go” schemes like Australian super.
“That creates a set of incentives for skilled New Zealanders to go overseas. Because you go overseas and you create your own asset base. So you go to Australia, you get your 12%, or you go to the US or the UK.”
These countries generally have generous tax-incentivised savings schemes, while KiwiSaver has relatively paltry tax incentives. All Kiwi citizens or permanent residents who have lived in New Zealand for at least 20 years following the age of 20, including five years over the age of 50, are eligible for superannuation.
New Zealand lost about 40,000 citizens in 2025, and 44,000 the year prior.
Rennie said that if New Zealand did change to a “save-as-you-go” scheme it would be a new incentive for people to stay in New Zealand rather than leaving, although it would not be a “silver bullet”.
He believed such a change was in the long term “probably the only practical way” to address the rising fiscal cost of superannuation.
Rennie was one of many at the forum pushing for a greater focus on KiwiSaver so that superannuation might be reformed.
Former Labour revenue minister David Parker said it was silly that New Zealand taxed people’s income before it went into KiwiSaver, meaning for many people about a third of their savings disappeared as tax immediately. He said KiwiSaver should be both compulsory and tax-incentivised, and this would allow people to save enough for superannuation to be reformed.
“I'm in favour of following Australia into compulsory KiwiSaver, and that there should be a tax incentive that rewards those people that have been forced into that route as you transition out of the current problem into a more prosperous future.”
National is currently pushing for KiwiSaver default contributions to raise to 5%, but not become compulsory or tax-incentivised, alongside a rise in the super eligibility age. Labour is yet to define its KiwiSaver policy but is against raising the super age.
Rennie said another reason so many Kiwis went offshore was a lack of “frontier companies” really pushing the envelope with new technology.
“This isn't primarily a supply side problem. We are producing 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.
“New Zealand's frontier firms ‒ the top 10% ‒ simply aren't as productive as those in comparable economies in other OECD economies.”
Rennie said this was even a factor in Treasury itself looking to use a lot of AI tools ‒ as he wanted to attract the best staff who wanted to work with brand new tools.
Defence spending: 'tailwind' turns to 'headwind'
Rennie said one under-appreciated fiscal challenge was the turnaround in defence spending. New Zealand spent about 2% of GDP on defence at the end of the Cold War, then gradually halved that — which actually helped get the books back into balance through the 1990s and 2000s.
Now the Government has committed to going back the other way, from about 1% of GDP to 2% by the early 2030s.
“GDP is roughly $415 billion, so it's like an extra four and a half billion [dollars],” Rennie said, pointing out that this was extra money to be found each year.
That money would have to be 'fitted into a contest of claims with health, education, climate' — and the big decisions around replacing the navy's maritime fleet would fall to whoever was in Government next term.
“It's gone from being a tailwind into a headwind.“
Asked if New Zealand should focus more on capability than specifically getting to a level of GDP spent, he said Treasury had to acknowledge the political reality, where other countries were calling for percentage-based spending.
“We have to be pragmatic in the sense of, there is an international conversation around expressing defence spending as a percent of GDP. We can't stand away from that completely, because we need to demonstrate credibly to our partners what we're doing,” Rennie said.
Treasury to go quiet before election
Rennie said Treasury had deliberately front-loaded its public commentary, releasing major documents last year and making speeches before pulling back as the election campaign intensified.
'Probably July, August onwards, where the political positioning is going to be more intense — we just won't want to be there, because things will be interpreted in a very charged environment.'
He said that was one reason Treasury had pushed out a suite of long-term reports last year and was continuing to give speeches early in 2026.
'First half of this year you keep talking about stuff, and then we're going to go a bit quieter.'