NZ Super is key focus of the 2022 RRIP. Research was undertaken to better understand how reliant New Zealanders are on it and its importance as a pillar of retirement income Policies.
Research found that NZ Super is critical to the majority of New Zealanders – with 40% of people aged 65 and over having virtually no other income besides NZ Super and another 20% having only a little more.
The importance of NZ Super is that it is part of stable and consistent retirement policy that allows people to plan over a long period of time and is a largely equitable system that is relatively simple to administer.
The key recommendation of the RRIP is that the age of eligibility to access NZ Super must remain the same. Any increase to the age of eligibility will only further disadvantage women, Māori, and Pacific People.
It has been in place, in more or less the same form, since the major welfare reforms of 1938. It is a cash payment that is not means-tested and has some residency-based eligibility criteria. The OECD refers to retirement income schemes as either tier 1, 2, or 3 schemes based on the objectives they aim to achieve. NZ Super is a ‘tier 1’ benefit as it aims to protect from poverty in old age. Tier 2 aims to ensure the adequacy of retirement income and tier 3 aims to raise the individual income replacement rate.
A snapshot of Aotearoa New Zealand’s superannuation history
Aotearoa New Zealand has had a pension system in place since the late 19th century aimed at preventing poverty amongst older people. Through the Social Security Act 1938 a two-tier public pension system was introduced that would last for nearly four decades. It featured a means-tested pension (Age Benefit) and a smaller universal superannuation payment.
Over the years, successive governments made various adjustments to the retirement pension schemes, including shifts in the ages of eligibility, increasing and then decreasing contributions, tax concessions, and changes to the percentages of wage ratios applied against pensions. Changes were made in the 1970s that created the New Zealand Superannuation [NZ Super] that we have today.
The beginning of the 21st century saw the establishment of the NZ Super Fund and KiwiSaver which have become the most significant innovations in retirement income initiatives in our recent history.
A more detailed account of the history of Aotearoa New Zealand’s retirement income, spanning 1898 to 2008, can be found in this earlier research paper commissioned by the Retirement Commission.