Should New Zealand raise the age of retirement? | The Front Page

Added: 2026-05-20

[00:00:05]Koda. I'm Chelsea Daniels and this is the Front Page, a daily podcast presented by the New Zealand Herald.

[00:00:16]On paper, New Zealand Super is one of the simplest parts of our welfare system. Most people become eligible at 65. It's not means tested, and for decades, it's been treated as a kind of social contract. You work hard, you reach retirement, and the state will be there. But that contract is under growing pressure. As our population ages and governments look for ways to contain long-term costs, the debate keeps returning. Should we raise the age of eligibility? And if we do, who pays the price? Today on the front page, Oakland University Business School associate professor Susan St. John is with us to talk about the future of superanuation, the arguments for and against raising the retirement age, and why this debate never stays settled for long.

[00:01:06]So, Susan, tell me, how does NZ Super work at the moment? Kind of who's eligible? Um, and most importantly, I suppose, what age can I retire?

[00:01:16]>> Yes. Well, it's a universal pension.

[00:01:20]That means everybody is entitled at the age of 65. They do have to meet a residency test. It's been 10 years. It's rising slowly over time to 20 years.

[00:01:32]Sometimes an overseas pension can be a problem. But basically, everyone is entitled to this really quite generous underlying basic income set at a level above a welfare benefit and supposedly enough to live on, although that's a bit questionable. Very simple to apply for. No complicated means test to go through as there is in Australia.

[00:02:01]And it comes in every week. It's adjusted yearly. It's protected by being adjusted by prices, but also linked to wages so that it doesn't fall behind living standards in general. It's got a lot going for it, Chelsea.

[00:02:20]>> Well, what is this debate about raising the eligibility age for super and why does that kind of keep resurfacing all the time in New Zealand politics, do you think? I think it just is because we're uneasy about what's happening at the moment. So, we've got this wonderful scheme and everybody gets this income at 65 whether or not they're in full-time well-paid work or whether they've got millions or billions of dollars of assets.

[00:02:50]And at the same time, we know that there's a huge degree of hardship and outright poverty within the New Zealand economy at the moment and it's getting worse.

[00:03:05]So, we've got child poverty, we've got elder poverty, we've got homelessness, but we've got this payment which seemingly is going to people who don't strictly speaking need it at all.

[00:03:19]So the idea of raising the age is a kind of like a knee-jerk reaction to that.

[00:03:24]Well, if we made it later, so people didn't get it till they were 67, then of course they just keep on working.

[00:03:31]>> And that's all well and good, I suppose, in someone in a cushy office job like myself. But if I was a trady and I I hit the age of 65 and had to work a couple more years, I mean, that that's really I mean, that's where the inequality comes in, right?

[00:03:45]>> Absolutely.

[00:03:47]The the idea that you can just raise the age and solve the problem is ludicrous.

[00:03:52]For a start, you could only phase it in slowly. So if we look at what national proposed last time, it was to start to raise it to 67, but not starting until 2037.

[00:04:06]And then of course it would only affect those people who were turning 65 having to wait a bit longer. It wouldn't have anything to do with the actual problem.

[00:04:17]which I've identified which is that it looks like we're paying an awful lot more to superanuation than is sensible when we have such need and also such a need amongst the aged population themselves. So we're seeing a lot more old people at food banks.

[00:04:35]They're coming into retirement with nothing but super many of them. Many of them have got um unstable rental situations or poor health. And this situation seems to be getting worse rather than better.

[00:04:51]>> Can you explain to me what means testing is because when we have this discussion we always say uh talk about means testing and that they do do it in Australia. What actually is it?

[00:05:01]>> Well, it's very dangerous as a term because means testing is broad. It covers not only income but assets and it's complicated. The Australian one is enormously complicated and I think most New Zealanders if they looked at how it operated and how low the thresholds were before you started losing 50 cents out of every extra dollar earned or your asset level was so low that you know you didn't have much of a buffer there before you were penalized from the asset test. I don't think they would have a bar of it. So men's testing is something that we do do for access to residential care facilities uh and it operates in a really draconian way there. So we have a little bit of a taste of it in New Zealand. I think it would be a huge mistake to adopt the kind of system that Australia has. We want to protect ourselves from that.

[00:06:04]Remember too in Australia that they jointly income an asset test so that for married women they can miss out on the age pension simply because their partner earns too much.

[00:06:18]>> Right. And so the means test I suppose the idea behind it would be that a billionaire would get less superanuation funding than say somebody who's renting like you say having a bit of a struggle because at the moment everyone gets the the same uh grant or or fee. Well, it's it's not quite as straightforward as that because New Zealand SEA is a gross payment, so it's taxable.

[00:06:45]If we compare what somebody on the very top tax rate gets after tax, so if they're on a 39% tax rate compared to someone on the lowest tax rate, that person on the 39% tax rate gets only 70% of what the lowest one gets. So our tax system operates as a clawback and it gradually removes but not fully.

[00:07:12]So somebody at the very highest level will still on the married rate be getting something like 15 or 16,000 a year tax after tax. And in terms of the the means testing as well, is it is it an issue if say like you know you've got you've got people in this country say you know they bought a a villa in Mount Eden in in the 80s for a packet of chips and $10,000 that would count as an as an asset now if they they still live in that home?

[00:07:46]>> Well, not usually. Um what happens in Australia is that um you're allowed a higher asset level if you don't have your own home but the home is is exempt.

[00:07:59]So different rules around different things and of course these can create enormous complexities and unfairnesses.

[00:08:07]So people can live in mansions and if the family home is exempt then they're not captured. I mean we see a little bit of this problem coming with the capital gains tax idea.

[00:08:25]>> Here's the point. Uh our superation cost against our GDP about 5.2%.

[00:08:32]That's way less or half of what some countries are wrestling with. And also you recall the Cullen Fund was started this beginning of this century to cover the cost of the peak years. So we've saved billions of dollars from the Cullen Fund all set to go all ready to go. And all a sudden these people who can't run the economy properly, who can't get the economy to four and 5% GDP growth and haven't done for decades are now saying, "Oh, now let's start now changing all the things to do with our older people."

[00:09:06]>> Many comparable countries have already lifted their pension age. We've mentioned Australia at 67 there. Does that mean that New Zealand is out of step or are there quite good reasons why uh we haven't done it yet?

[00:09:22]>> Well, each country is different and has different arrangements and I'm not sure I I haven't studied it particularly, but I'm not sure it's working terribly well in Australia for a large number of people for the reasons that we discussed before.

[00:09:39]So we can't really look to other countries necessarily for a guide.

[00:09:45]>> What are the strongest arguments would you say against raising the retirement age?

[00:09:51]>> The fact that people are worn out by the time they're 65 if they're in a trades occupation. Um we know that Mari and Pacifica have lower life expecties and enter retirement often in worse health than average. Uh and women may be disadvantaged as well by the raising of the age, especially if they've been caregiving all their lives and looking just for a little bit of relief at 65.

[00:10:22]So there are good reasons to keep it at 65 and not to falsely believe that by promising to raise it starting in 10 years time it's actually going to address what the real issue is.

[00:10:38]>> Yeah. Do you think that this debate is sometimes framed quite you know quite a lot too narrowly I suppose as if the option were to either raise the age or the other option is to just suffer a fiscal crisis. I mean are there other options available to us?

[00:10:55]>> Yes we got to be a bit careful about that fiscal crisis talk. Um of course what I would look at is the social security budget. So we spend about 46 billion on social security payments like super unemployment benefits, sickness benefit, disability payments, hardship, accommodation supplements, student allowances, all those things. And we can see that New Zealand superanuation dominates that at 25 billion.

[00:11:27]But we have to also realize that that's a gross figure and remember that it's taxable and people at the top end are paying a lot of it back. Um probably about five or six billion of tax comes straight back to the government. And of course when superanuation is out there being spent there's a lot of GST also flows back to the government. So fiscal crisis and pointing to I think we have got issues but the issue is not necessarily the design of the state pension.

[00:12:01]>> Would two years or raising it just by two years make a considerable difference. It would make a significant a contribution to the saving, but it wouldn't be um you know kind of an extraordinary answer, a magic bullet.

[00:12:24]>> Yeah. And it that's the thing. Hey, it is often touted as a magic bullet. I I would I would say I mean people just kind of see the headline figure raising it or not raising it. If it if it's raised then we save x amount of money.

[00:12:40]If it's not raised we spend x amount of money because we have an aging population and it's just that do you think it's a bit of fear-mongering going on?

[00:12:48]>> It's too much concentration on the dollar figures and too little appreciation of the great thing that we do with New Zealand super. So it provides a basic income and using that basic income many people in retirement particularly in the first say 15 20 years of retirement are contributing enormously to social cohesion looking after grandchildren going helping out in the food banks in the charity sector. Um doing all the bringing family together work that women always do. uh and not only women of course. So what we do with superanuation at the moment is quite genius really because it's an unconditional amount of money and you can choose to then work in whatever activity you want to. Maybe you want to be an artist or write a book. Uh so this is a 21st kind of solution um to problems and it would be a shame if we destroyed that.

[00:13:53]>> And generally I think and you mentioned all of those things about contributing back to society and and perhaps doing the things that you didn't have time to do beforehand. And you got to remember these people have been working their entire lives paying, you know, being taxpaying citizens their entire lives and they're entitled to that, you know, reprieve at the at the end, so to speak.

[00:14:14]And I'm not saying end cuz 65 is still quite young, isn't it, these days in terms of what other options are on the table if we we were to just say, "No, we're not we're not raising it." What else could be done, I suppose, to our super?

[00:14:30]Yes. Well, just just to look at that issue of um the fact that uh you get this payment and that it looks generous and you've worked all your life and you've contributed that kind of feeling that it's yours and you own it in a way that's justified in New Zealand because we do not have a private pension system which is highly tax subsidized as it is in other countries and is in Australia.

[00:14:59]So we don't have any of that kind of indirect state support coming through for us in retirement. And even in Kiwi Saver, you can see that we're stripping away even the barest of subsidies that were there. Uh and so let's be really careful that that we don't kind of not see it in the bigger picture. When you think about the extreme of means testing on the one hand and universal on the other and you think about the real problem that we would really rather prefer that we weren't paying it to the very wealthiest and yet we don't want to penalize everybody by raising the age then we could have a compromise and we have a history of this. So if we go back to 1993, we had an accord around superanuation.

[00:15:51]It was going to be paid but also other income would be subject to a search charge. And we had a search charge in place actually from 1985 to 1998.

[00:16:06]And it was a little bit contentious, but it did raise a significant amount of other income that was really useful. And it was, I think, a big mistake. And we said when we're working on the Todd Task Force um in the 1997 Todd Task Force that this was a really poor decision to get rid of it, make it work better. And so some of the work that I do in the pensions hub at the university is to look at how you would redesign the search charge to give a bit of a bigger clawback than the one I've described coming through the existing tax system.

[00:16:47]And you can do that. What you would do is you would pay everybody a non-t taxable basic income at the level that it is now say and then if you opted into that your other income would be taxed on a more progressive tax scale than the current one with the effect that you would be clawing back the full amount of superanuation from those at the top end.

[00:17:14]But you would design it so that that 60% who've got virtually little else other than New Zealand super are not really affected at all.

[00:17:24]>> Right. So, and presuming that the people at the top end do uh gain financial security, they've got bonds, stocks, you know, other properties, etc. >> Well, that's all contributing to their income, which would be part of this extra taxable income.

[00:17:41]>> Yeah. So that that would make kind of level it out a little bit.

[00:17:44]>> Well, that's the whole way that it would be designed. So that progressive meaning that you're taking progressively more off the top end.

[00:17:52]>> Thanks for joining us, Susan.

[00:17:53]>> Thank you.

[00:17:57]>> That's it for this episode of The Front Page. You can read more about today's stories and extensive news coverage at nherald.co.n.

[00:18:07]The front page is hosted and produced by me, Chelsea Daniels. Kane Dicki is our studio operator, Richard Martin, our producer and editor, and our executive producer is Jane Ye. Follow the front page on the iHeart app or wherever you get your podcasts, and join us next time for another look beyond the headlines.