Behind any debate about superannuation sits the maxim that nothing imprisons a person like poverty in old age. Behind it also sits the hard truth that few issues are more politically challenging.

New Zealand's aging population creates a range of policy and funding challenges that affect all of us.

Pension tension: Summing up the Super Summit, published today by the Retirement Commissioner is the product of a one-day summit, hearing from politicians, financial advisors, actuaries and others. This is what they said and why we should pay attention well before we need to apply for a Goldcard. 

The essential consensus was: the enduring need for a system of this kind is clear, the challenge of sustaining it in its present form is growing steadily more daunting. 

What, then, is to be done?

What are the problems?

The principal problem is affordability.  The proportion of GDP going towards superannuation is already high and rising. Economist Bryce Wilkinson told the summit the combination of increased public healthcare spending for the ageing population and NZ Super could account for 18% of GDP by 2060, up from 11.4% in 2024.

In 1898, life expectancy at age 65 was about 13 years, compared to 22 years in 2001, and 23.6 years in 2024. By 2044, it’s projected to be 25.7 years. The eligible proportion of the population aged 65 or older was 4.1% in 1901, 12% in 2001, 17% in 2024, and could reach 22% by 2044.

“So, in short, each generation of people of working age bears a higher burden than the generation before,” he said.

And there's a further growing problem, the report notes:

“When NZ Super was introduced, it was with the underlying assumption that those accessing it would be mortgage-free homeowners. Today, the reality is very different. There are declining home-ownership rates and more people needing to continue working longer because they still have mortgages to pay, are paying rent, or haven’t been able to save enough to retire. Based on current trends, there is going to be a 100% increase in people renting aged 65 and over.”

What might the solutions be?

Assuming we want to persist with a superannuation arrangement - and on this question there was broad agreement about its crucial importance in protecting the aged against poverty - the obvious question raised by these numbers is: what must be done to preserve its viability?

Do you raise the age of eligibility? Do you introduce means-testing and/or Income testing? Do you remake the pension system altogether?

There was broad agreement among the panelists that something has to give, some form of tuning, some narrowing of eligibility, is inevitable.

Some were prepared to go further. Max Salmon argued that raising the age can only do so much, that indexing the pension solely to CPI, will only take us so far; that waiting for productivity to be the tide that raises all boats also seems unwise, given New Zealand’s recent experience. We must therefore turn to other models. He proposes a contributory model similar to that of Australia’s mandatory scheme.

Generally, however, panelists framed their suggestions within the context of adjusting the current model to remain sustainable. Specifically, they identified changes to eligibility criteria based on age and/or means. However, this generally came with caveats that any changes would need to address structural inequalities while maintaining social cohesion and ensuring the wellbeing and security of all citizens in retirement. Keep the baby, in other words, refresh the bathwater.

Furthermore, any such changes should be clearly and meticulously outlined well ahead of time.

Associate Professor Susan St John: “If we are to do it, it’s best to do it in a reasoned way and to do it sooner rather than later to avoid the knee- jerk reactions that we have seen in the past.”

The question of generational tensions also figured prominently, including most crucially the question: is it misleading to cast the competing interests of the working young and superannuitants when the larger question is: how best do we go about allocating resources in a welfare state? 

Dr Alison O’Connell said: “Younger people are likely to need NZ Super more than older people do now because of all the trends we have been hearing about in homeownership and ability to save. So, when [the previous panel] were talking about robbing young Peter to pay old Paul, I think the different way of framing that is talking about young Jane becoming older Jane, and what Jane needs during her lifetime.

She advocated for a contextualised approach to reciprocity, emphasising social insurance across an individual's entire lifespan, not just at the point of retirement eligibility. This concept was further discussed at the summit, highlighting that the growing instability in the workforce and the continuous need for individuals to reinvent their careers call for a more adaptable approach to retirement planning.

The suggestion here is that retirement entitlements need to be adaptable, supporting individuals not just at the end of their working life but throughout their career transitions and varying phases of life.

This approach naturally leads to considering broader and deeper changes, such as the concept of a universal basic income. This system would provide a consistent financial foundation that people could rely on regardless of their employment status. Such a shift would obviously amount to a comprehensive overhaul of how we think about and implement retirement support, and all changes, from the smallest tweaks to the largest transformations, imply a political headwind to be faced.

The politics of it

Politicians with long experience brought to the summit cautionary insights about the practical limits of what might be achievable in the politics of superannuation.

Peter Dunne expressed scepticism about the possibility of developing a consensus on NZ Super because, “there’s too much political baggage involved and too much political game playing in terms of who wins and loses.” He suggested a more comprehensive approach to retirement security that includes healthcare, access to services, and broader social issues. He also recommended that efforts to build consensus should go beyond superannuation to fully address the diverse needs of senior citizens.

Liane Dalziel raised concerns about the declining trust between the government and the public, recommending a move towards more collaborative decision-making models like citizens’ assemblies or juries. She offered instances such as the abortion debate in Ireland as examples of a more inclusive and transparent princess for working towards a common accord.

“We’re not under pressure. So, the opportunity to build a broader cross-party consensus on bigger issues than superannuation I think exists in a way that hasn't been done perhaps for the last 40 years if not longer, but there are always going to be problems.”

And ultimately, everything that has come out of the summit turns on this critical point: Can any proposal to change the present terms make its way through the cauldron of political and media debate? Can a viable consensus be presented to the nation and garner an enduring support?

The next step from the commission’s point of view is to carry this to the relevant ministers in the hope of initiating such a process.

Specifically, the Retirement Commissioner will approach:

• The Ministers of Social Development and Seniors, to assess whether a cross-party forum can be established to support the development of an agreed approach to NZ Super over a longer period and a scheduled formal review process for NZ Super can be developed and legislated. 
• The Minister of Commerce and Consumer Affairs, to ascertain if there are aspects of NZ Super policies, and KiwiSaver policies as they may apply, that should be included for analysis or review in the terms of reference for the Review of Retirement Income Policies 2025.
• The Chair of the Social Services and Community Select Committee, to request an opportunity to brief committee members on key ideas and themes emerging from the Super Summit, and next steps.

Is the current system affordable and sustainable? For now, yes. But probably not in the long run. Something will have to give. 

The clear political lesson of recent decades is that any kind of superannuation reform stands little chance of success if it’s delivered too abruptly. 

The summit’s clear guidance is to slowly and inclusively develop reforms with a long-term view, starting before any real pressure begins to build. 

A cynic might call this the Kiwi way of avoiding conflict by kicking the can down the road. But executed with sufficient expertise and care, this approach might yet deliver us a solution we can all live with.