New Zealand’s retirement system faces a looming question - will you get superannuation when you retire? As costs rise and the population ages, talk of means testing superannuation is becoming harder for politicians to ignore. In this episode, Mike and James unpack what means testing could look like, who it might affect, and whether relying on government support in retirement is still realistic.
Can You Rely on Superannuation Forever?
Superannuation has long been seen as a guarantee – a steady payment after decades of work and taxes. But with an ageing population and rising costs, many are now asking: will you get superannuation when it’s your turn? The discussion around means testing superannuation is heating up, as political and economic pressures make the system harder to sustain.
In this episode, the hosts break down the political reluctance to touch the scheme – describing it as a “slow-motion car crash” no one wants to fix. Cutting superannuation is politically dangerous, yet inaction only delays the inevitable. The most likely “baby step”? Introducing means testing – a way to reduce payments to wealthier retirees while keeping the system afloat.
What Does Means Testing Superannuation Mean?
At its core, means testing involves assessing a retiree’s income or assets to decide whether they qualify for full or partial superannuation. As James put it, “you meet whatever criteria, therefore you do not get money.” The question is: how do you measure fairness without making the system overly complex?
Some argue for an income-based model – simpler and harder to avoid. But others point out that those with access to accountants or trusts could find loopholes. In New Zealand, around 9,000 people over 65 earn more than $200,000 a year, and another 33,000 earn between $100,000 and $200,000 – all still eligible for superannuation. That’s 40,000 high-income retirees who could collectively cost the country around $600 million a year.
While that may not seem much compared to the $21 billion annual cost of New Zealand Super, every dollar saved could be redirected into social programmes or infrastructure. As one host said, “$600 million could pay for a motorway somewhere – that would move the needle.”
Lessons from Australia’s Means-Tested Model
Australia already applies means testing, and the results are mixed. About half of Australians receive the full pension, 30% get a partial pension, and 20% receive nothing. While the policy saves billions, it also leads some retirees to shift wealth into their homes to qualify. This distorts the housing market – keeping larger properties in the hands of retirees and making it harder for young families to buy.
If New Zealand adopted a similar approach, estimates suggest it could save up to $9 billion annually. But with complexity comes unintended consequences. Would retirees hoard property? Would reverse mortgages surge? These are the difficult questions policymakers must weigh when deciding how to future-proof superannuation.
Is Means Testing Fair?
Critics argue that older Kiwis have paid taxes their entire working lives and deserve their superannuation. Supporters, however, believe reform is essential to make the system sustainable for future generations.
As one host reflected, “I’ll probably pay all my tax, then get to that point where I’m about to be on super – and it will probably have some type of change. I’m okay with that because I want New Zealand to be a better place for future generations.”
The takeaway is clear: regardless of government policy, New Zealanders must take ownership of their retirement plans. The real question isn’t whether you’ll get superannuation – it’s whether you’ll need it.
Key Takeaways
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Superannuation currently costs New Zealand over $21 billion a year, with costs rising annually.
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Means testing could save hundreds of millions but adds administrative complexity.
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Around 40,000 retirees earn six figures and still receive full superannuation.
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Australia’s model shows both savings and side effects, including reduced housing mobility.
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Future governments may be forced to act – making personal financial planning essential.
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The safest strategy: plan as if you’ll receive no superannuation at all and ensure your investments can sustain your retirement independently.
Next Steps:
If you’re worried about means testing and want to make sure your retirement doesn’t depend on government policy, speak to a Lighthouse Financial adviser to build a financial plan that puts you in control of your future.
If you’d like to learn more, check out these other episodes below.
For a no obligation discussion to see how we can help you on the path to wealth, please contact us.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
