NZ and AU pension pros and cons
A new report by NZIER, in collaboration with the Retirement Commission, has assessed New Zealand’s and Australia’s superannuation systems, highlighting the strengths and weaknesses of each.
Five key areas of comparison
The analysis rated both systems across adequacy, equity, sustainability, impact on savings and investment, and effects on labor participation.
- Adequacy: New Zealand’s system provides relatively higher income levels for retirees, compared to working-age incomes.
- Equity: While New Zealand’s universal NZ Super reduces income inequality in retirement, Australia’s reliance on private savings can perpetuate income disparities.
- Sustainability: Government retirement spending is projected to increase in New Zealand, while in Australia, it’s expected to remain steady.
- Savings and Investment: Australia’s mandatory superannuation contributions boost private savings more significantly than New Zealand’s voluntary KiwiSaver.
- Labour Impact: Australia’s system may discourage continued work at pension age, while New Zealand’s setup is more neutral.
System differences reflect cultural and historical factors
NZIER’s Adrian Katz (pictured above left) explained that retirement income policies reflect national values, demographics, and economics.
“Because New Zealanders have access to a universal pension through NZ Super, KiwiSaver plays a different role from Australian Superannuation,” Katz said.
Equity versus savings emphasis
Retirement Commissioner Jane Wrightson (pictured above right) said that New Zealand’s universal approach promotes equity.
“Australia’s greater reliance on private savings perpetuates inequalities from working years,” Wrightson said “The universal coverage of NZ Super enables New Zealand’s system to deliver more equitable outcomes.”
Spending comparisons show modesty in both countries
Both nations spend significantly less on pensions than the OECD average of 10.2% of GDP.
By 2050, New Zealand’s pension costs are projected at 5.8% of GDP, while Australia is expected to spend 4.6%, largely on tax concessions for private savings.
Balancing growth and equity
While Australia’s compulsory savings scheme promotes higher personal retirement savings, New Zealand’s universal pension emphasises equitable outcomes.
Wrightson advocates a gradual increase in KiwiSaver contributions to strengthen retirement savings, tailored to New Zealand’s unique social and economic landscape.
To download the full NZIER report, click here.
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