Every day, New Zealand spends $39 million keeping its pension system running for people aged 65 and over. By 2040, that daily cost is projected to hit $120 million — a tripling in under two decades. For someone in their 40s right now, that raises a straightforward question: will the same rules still be in place when they retire, or will the system look completely different by then?
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
The numbers are large enough to feel abstract, but the mechanics are straightforward. New Zealand Superannuation is universal — every resident over 65 gets it, regardless of other income or savings. The cost grows because people live longer, wages (to which the pension is pegged) rise, and the share of working-age people shrinks. The ratio of workers to retirees has already halved over the past 50 years, and projections suggest it will halve again in the next 50. That demographic maths is what drives the debate over whether the current system can hold.
Political parties are split on what to do. The National Party and ACT support raising the eligibility age to 67 by 2040. NZ First opposes it. Labour and the Greens favour the status quo. Te Pāti Māori has proposed lowering the retirement age for Māori to around 55–58. And a separate thread of the debate asks whether the pension should stop being universal at all — shifting instead to a means-tested model that checks your income or assets before paying out. How your KiwiSaver fits into that picture matters more than many people realise. Here’s what you actually need to know.
The central concept here is universal superannuation — a flat-rate pension paid to everyone over 65 regardless of their other income or wealth. Because it’s universal, the cost rises automatically as the population ages and wages grow. The alternative being debated is means testing, where the payment is reduced or removed for people above a certain income or asset threshold.
What I tend to notice is how often people assume the current rules will still apply when they retire. The research suggests that assumption is risky. Every party has a different proposal, and the cost pressure is only going one direction. Why so many Kiwis retire with less money than they expected is closely tied to this uncertainty.
The cost trajectory and what it means for different age groups
The $39 million daily figure is the starting point. By 2040, that number triples to $120 million a day — an increase that doesn’t come from waste or inefficiency. It comes from structural demographics: more people over 65, fewer working-age people per retiree, and a pension that’s linked to wage growth rather than prices.
For someone who turns 65 today, the system works as advertised. For someone who turns 45 today, the question is whether the eligibility age will be 67, whether the payment will be taxed differently, or whether a means test will reduce or remove their entitlement. The further you are from retirement, the more uncertainty you carry.
The political table below lays out where each party stands. These aren’t hypothetical positions — they’re stated policy platforms that would directly change how much you receive and when you receive it.
→ Scroll right to see all columns
| Party | Retirement age position | Means testing stance |
|---|---|---|
| National | Raise to 67 by 2040 | Open to discussion |
| ACT | Raise retirement age | Supports targeting |
| NZ First | Opposes raising age | Opposes means testing |
| Labour | Status quo (65) | Opposes means testing |
| Greens | Status quo (65) | Opposes means testing |
| Te Pāti Māori | Lower to 55–58 for Māori | Not stated |
Economist Shamubeel Eaqub argues that raising the age is unfair to people in physically demanding jobs who can’t keep working past 65. Max Rashbrooke calls raising the age the “second-worst option,” noting it hits poorer people hardest. Eric Crampton points out that NZ Super income is already taxed at 39% for high earners, and adding a surcharge would create effective marginal tax rates that push people to retire earlier — reducing tax revenue at the same time. KiwiSaver controversies and whether your retirement is really secure add another layer to this picture.
Where the debate gets messy — mistakes and gaps in the public conversation
Assuming the current system will apply to you
The biggest mistake is treating NZ Super as a fixed promise. The eligibility age has been 65 since 1977, but the cost trajectory means change is almost certain for anyone under 50. The question isn’t whether the system will change — it’s which change will happen and when. If you’re 45 and planning to retire at 65, a shift to 67 by 2040 would mean two extra years of funding your own living costs before the pension kicks in.
Thinking means testing is a simple fix
Means testing sounds fair — only pay the pension to people who need it. But New Zealand tried this before. From 1985 to 1998, the government imposed surcharges on superannuitants with other income. The backlash was so strong that the surcharges were scrapped. Eric Crampton notes that adding a means test today would create high effective marginal tax rates, potentially causing people to retire earlier and reduce the tax base. What looks clean on paper creates messy real-world behaviour.
Ignoring the impact on people in manual work
Raising the retirement age to 67 sounds reasonable if you work in an office. But for people in construction, farming, cleaning, or care work — jobs that wear the body down — working two more years may not be realistic. Rashbrooke and Eaqub both make this point: the people who die earliest and have the shortest retirements are also the ones least able to work longer. A uniform age increase hides that inequality.
Overlooking how the pension is linked to wages
NZ Super is pegged to wage growth, not inflation. That means when the economy grows and wages rise, the pension rises faster than prices. That’s good for recipients, but it also means the cost grows faster than the overall economy during good times. Anyone projecting future costs needs to account for that link — it’s a feature that makes the system more expensive than a price-linked pension would be.
How the system works and what could change — a practical guide
How NZ Super is calculated and paid today
New Zealand Superannuation is a flat-rate, taxable pension paid fortnightly to everyone aged 65 and over who meets the residency requirements. The base rate for a single person living alone is set at 72.5% of the average wage after tax. For a couple, it’s about 60% each. The amount is adjusted annually in line with wage growth. There’s no asset test and no income test — if you’re 65 and have lived in NZ for at least 10 years since age 20 (with 5 of those years after 50), you qualify.
What raising the age to 67 would actually do
The National Party’s proposal of 67 by 2040 would phase in the increase gradually. For someone born in 1975, that could mean waiting until 67 to receive the full pension. The policy would reduce the total cost of the system by roughly two years of payments per person, but it would also push two years of living costs onto individuals, their savings, and their KiwiSaver balances. If you’re in a physically demanding job, those two years could be the difference between a comfortable retirement and a difficult one.
What means testing would look like
Means testing could take several forms: an income test, an asset test, or a combination. The 1985–1998 surcharge model deducted NZ Super based on other income, creating effective marginal tax rates that could exceed 100% for some people. A modern version might target the pension to the bottom 50% or 60% of households by wealth. The advantage is that it limits the total cost. The disadvantage is that it creates a disincentive to save — if your pension is reduced because you saved, why save at all? Rashbrooke calls means testing the best among a bad set of options, but notes it’s administratively complex and politically difficult.
The emerging debate: automatic ratcheting and future changes
Eric Crampton has proposed a one-off increase in the eligibility age combined with an automatic ratcheting mechanism that ties the retirement age to healthy life expectancy. Under that model, as people live longer in good health, the retirement age would rise automatically — removing the need for repeated political fights. This is the most forward-looking proposal in the current debate. No party has adopted it as official policy, but it’s gaining attention as a way to depoliticise the issue. Financial freedom in NZ — the brutally honest truth is worth reading alongside these proposals.
Frequently asked questions about NZ Super’s future
Will NZ Super still exist when I retire? ▾
Does KiwiSaver affect my NZ Super entitlement? ▾
What happens if I keep working past 65? ▾
Is NZ Super the same as the Australian Age Pension? ▾
Could the retirement age be raised before 2040? ▾
What’s the best way to prepare for possible changes? ▾
What the next decade will decide about your retirement
The NZ Super debate is not about whether the system is good or bad — it’s about whether a universal, wage-linked pension can survive when the ratio of workers to retirees keeps halving. The proposals on the table differ in how they distribute the cost, but they all agree on one thing: the current trajectory is not sustainable. The next government, regardless of its colour, will have to choose between raising the age, introducing means testing, or both. That decision will reshape what retirement looks like for everyone under 50.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Grow your wealth like a garden — the power of compound interest for Kiwis.
Sources and Further Reading
KiwiSaver controversies — is your retirement really secure? — A deeper look at whether KiwiSaver balances will be enough when NZ Super rules change.
Why so many Kiwis retire with less money than they expected — Explores the gap between retirement expectations and reality, including the role of NZ Super.
The Spinoff (2026). What should we do about New Zealand’s soaring superannuation bill. 🔗
