Economists say means-testing NZ Super makes sense

Just over 2 percent of all people aged over 65 are still earning more than $180,000 a year, and top economists say it is worth asking whether they should still also be paid NZ Super.

New Zealand is relatively unique internationally, in that most people who meet a residency requirement and are over 65 can access NZ Super. It is not reduced according to a person's other income or assets.

Data from Inland Revenue issued last year shows that in the 2024 tax year, 9 percent of all people aged over 65 were still earning more than $100,000, 3.6 percent were earning more than $150,000 and 2.1 percent over $180,000.

They could all qualify for the full amount of NZ Super, whereas people who are on a JobSeeker benefit, for example, can only earn up to $160 a week as a household before their entitlement starts to reduce.

Westpac chief economist Kelly Eckhold said means-testing was one of a number of cost-saving measures that could be introduced for NZ Super.

"I'd take the view that you probably need some combination of all of them, to get on top of it," he said. "Some increase in the age, some change in the indexation away from wages and perhaps to just the CPI, and some element of means-testing as well would be a sensible part of the package."

Treasury has raised concerns about the sustainability of the current scheme, because the ratio of working taxpayers to NZ Super recipients is set to drop significantly over coming decades. NZ Super is paid from tax revenues collected from current taxpayers.

Eckhold said the data showed that most of the people on higher incomes were aged under 70. "I guess by the time you're in your early 70s people have probably stopped working."

He said New Zealand had high rates of workforce participation from older people, which could reflect the fact that they could earn and still receive NZ Super.

"My sense is there's not enough urgency in the issue right now. It is 10 to 12 years down the track before we start seeing the really big lift in Super costs and that's comfortably far enough away that other issues are top of mind right now.

"But I'd say by the time you get into the early 2030s some of those numbers are going to start appearing in the back end of the fiscal forecast track so that will be relevant at that point for sure. And arguably by then a bit later to be doing much about it."

He said, based on high level estimates, if New Zealand adopted the same means and asset tests as Australia, 33 percent of single pensioners would receive less, and 54 percent of couples. Another 18 percent of single people would lose all NZ Super and 26 percent of couples.

"If you moved to an Australian-style thing you can reduce your Super spend by roughly a third."

He said, while people argued means testing could be hard to do, it was achievable for every other payment. "We manage it for everything else but somehow it would be completely undoable when it comes to Super."

Eaqub said making changes so that support was not offered to those who did not need it would mean it was able to continue for those who did.

"A lot of single people would not be able to afford to live in dignity if they didn't have some form of support. That's why it's so important for New Zealand Super to be made sustainable over time so that those who need it can live in dignity in old age."

A National Party spokesperson said it had ruled out means-testing NZ Superannuation. Labour's finance spokesperson Barbara Edmonds said it had not considered it. "Changes to our superannuation settings need to be enduring across governments and Labour believes consensus is required across parliament to achieve this."

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