NZ Super: Poverty prevention or tax reward?

Retirement Commissioner Jane Wrightson has released the first ever definition of what New Zealand’s retirement income system is actually for, while emphasising that financing retirement must be a joint effort between individuals and the government.

New Zealand Superannuation (NZ Super) and retirement savings plans like KiwiSaver make up the retirement income system, but Wrightson says that until now there has been no definition of what that system should achieve. There is also no definition of the role of NZ Super in the Superannuation and Retirement Income Act.

“During the Review of Retirement Income Policies last year it was clear New Zealanders had deeply held views on the role of NZ Super, but they differed,” says Wrightson.

“Some considered it was there to prevent poverty and ensure people retained dignity in old age, others saw it as providing a basic standard of living, as a gesture of care for the elderly or as a reward for working hard and paying taxes.”

Wrightson says her role requires her to monitor and advise government on retirement income issues, but that is hard to do without defining what our retirement income system is for. As a result, she formed an Expert Advisory Group, made up of academics and policy specialists, to fill that gap.

She says the “purpose statement” that has been created will be used by her office – the Commission for Financial Capability - and will allow her to test proposals that may affect people’s retirement income in the future.

The Expert Advisory Group’s purpose statement for the New Zealand’s retirement income system: “A stable retirement income framework enables trust and confidence that older New Zealand residents can live with dignity and mana, participate in and contribute to society, and enjoy a high level of belonging and connection to their whānau, community and country.”

To help current and future retirees achieve this, a sustainable retirement income framework’s purpose is twofold, the advisory group says.

Firstly, to provide NZ Super to ensure an adequate standard of living for those who are eligible, with NZ Super the government’s primary contribution to financial security for the remainder of a person’s life. 

Secondly, to actively support New Zealanders to build and manage independent savings that contribute to their ability to maintain their own relative standard of living.

It also notes that the retirement income system sits within the broader government provisions of things like health care, housing and transport, that are needed to help older people live well.

“This statement acknowledges the dual role of Government and the individual in preparing for their retirement,” says Wrightson.

“Whether people use KiwiSaver or another vehicle to build independent savings, they must be supported in putting money away for retirement because for many, NZ Super alone will not be enough.”

The new definition comes as New Zealand’s retirement income system slipped from 8^th to 10^th place in the Mercer CFA Institute Global Pension Index this year, coming in behind countries such as the Netherlands, Australia and Norway.

“My aim is to ensure a stable income system to enable people, now and in the future, to retire with confidence,” Wrightson says.