New Zealand Superannuation

The Retirement Commission characterizes New Zealand Superannuation as a Universal Pension paid to everyone aged 65 and over after fulfilling a minimum 10 years’ New Zealand residency (including 5 years over the age of 50).  Apart from a difference between the amount paid to married couples and singles, the Universal Pension is presented as a standard amount paid to everyone regardless of personal assets and not subject to means testing.

In addition to their NZ Super entitlement, New Zealanders can also participate in any number of savings programs including KiwiSaver, supplemental superannuation schemes, personal annuities, and other investment returns.  Residents can be millionaires but still receive full NZ Super on reaching 65.

On reaching the age of 65, however, roughly one in every four New Zealanders discovers that his/her right to the “Universal Pension” doesn’t exist.

New Zealand Superannuation has remained largely unchanged since it was introduced in 1938.  Reflecting New Zealand’s then extreme isolation, it was an admirable program for its time, but in a vastly changed world it has become obsolete.  A succession of alterations and amendments over the years has not sat well with the original structure.

Successive governments have avoided overhauling and updating the system in the belief that providing a more equitable system could lead to major cost increases.  Instead, outdated legislation unfairly penalizing many people has been retained.  Governments have been able to maintain the impression that the nation is being provided with a benevolent state retirement program.  This policy has kept the majority quiet.  The press has said very little.

The reality is that New Zealand governments consistently minimise the cost of superannuation by clawing back payments of NZ Super wherever they possibly can.  One of the most effective clawback mechanisms is the direct deduction policy.

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