In 1976, there were about eight working-age New Zealanders for every person over 65. Today, the ratio is roughly four to one. By 2051, Treasury projects it will fall to about two to one.<\/p>\n
When eight workers supported one retiree, the system worked. With four, it is buckling. With two, it fails.<\/p>\n
The Government is running a deficit of about $14 billion. Superannuation costs roughly $25b a year and is a major pressure on the Crown accounts.<\/p>\n
We are borrowing to fund current consumption and sending the bill to our grandchildren.<\/p>\n
We have known for half a century that a universal, tax-funded pension would collide with demographics. That collision has arrived. Borrowing is not a strategy. It merely postpones the reckoning.<\/p>\n
Yesterday\u2019s solutions will not solve today\u2019s problem.<\/p>\n
The closest we came was the Norman Kirk-funded superannuation scheme, later dismantled. Had super been properly funded decades ago, we would not face today\u2019s squeeze.<\/p>\n
But we need a solution for now, not in 20 years\u2019 time.<\/p>\n
Treasury\u2019s orthodox response is to lift the retirement age and trim entitlements. At a recent conference, one leading fund manager suggested eligibility would need to rise to 72 to stabilise the system.<\/p>\n
Superannuation is only half the demographic time-bomb. Treasury estimates an ageing population will significantly increase health spending, doubling it over the next 30 years. That is a topic for another column.<\/p>\n
Simply raising the age and cutting payments risks condemning many to poverty. Not everyone can continue physical labour into their seventies. For some, work is not a choice but a physical limit.<\/p>\n
Here is my proposal: A two-tier system, drawing on the logic of the original old-age pension.<\/p>\n
First, an old-age pension available at 65 for those who cannot continue working. It would be a modest safety net, broadly aligned with the JobSeeker rate, including supplements for housing, dependants and disability. The obligation to seek work would be removed.<\/p>\n
Second, universal superannuation paid at 72, indexed to inflation rather than wages.<\/p>\n
From age 65 to 72, individuals could elect to take the lower old-age pension. But once chosen, that decision would be permanent.<\/p>\n
Why would anyone defer? Because the universal super at 72 would be materially higher in lifetime value.<\/p>\n
JobSeeker is about $361 a week after tax for a single adult. NZ Super for a single person living alone is roughly $540 to $550 a week after tax. The gap is substantial.<\/p>\n
Allowing people to defer super until 72, in return for higher payments later, would provide a real incentive to remain in work where possible.<\/p>\n
This restores intergenerational fairness. Treasury\u2019s long-term models assume most New Zealanders retire in their mid-60s. My proposal changes that assumption. <\/p>\n
Those who can continue working are rewarded for doing so. The gain is double: Fewer years drawing super and more years paying tax. That improves the Crown\u2019s position and strengthens the economy.<\/p>\n
The fiscal impact would be significant. Each person who delays universal super reduces lifetime cost by tens of thousands of dollars.<\/p>\n
If large numbers defer, aggregate savings run into billions \u2013 resources that could fund healthcare and other essential services.<\/p>\n
The original old-age pension was income-tested. Means testing is complex and politically unpopular. I would begin without one, relying on incentives. If insufficient numbers defer, a modest means test could be applied.<\/p>\n
There is no painless path to sustainable retirement. Fair reform must be shared across generations.<\/p>\n
Increasing KiwiSaver contributions \u2013 as Christopher Luxon proposes \u2013 will improve private retirement incomes but does nothing to reduce the Crown\u2019s immediate burden. The benefits would take decades to appear.<\/p>\n
Our choice is stark: Continue borrowing until markets impose discipline, or act now while we still have control.<\/p>\n
Chris Hipkins, in his state of the nation speech, did not mention the superannuation crisis.<\/p>\n
National edges cautiously toward higher eligibility ages.<\/p>\n
Winston Peters vetoes any change.<\/p>\n
The Greens argue \u201cthe rich can pay\u201d, as if the tax base were unlimited.<\/p>\n
Demographics are indifferent to slogans.<\/p>\n
Sir Roger Douglas founded the Act Party to advocate savings-based superannuation.<\/p>\n
Thirty years ago, it was the right answer. Greater saving remains the surest way to protect living standards in retirement.<\/p>\n
But we cannot fund today\u2019s superannuation with a solution that will take 20 years. We need practical reform now \u2013 fair between generations, growth-enhancing and fiscally sustainable.<\/p>\n
Delay will not make the arithmetic disappear.<\/p>\n
The crisis is not coming. It is already here.<\/p>\n