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Women’s Retirement Incomes in New Zealand: A Household Bargaining Approach - WP 04/22

5  The New Zealand Pension System[7]

New Zealand has a two-tier system of retirement income provision. The first tier is provided by NZ Superannuation. This is a universal public pension, funded on a pay-as-you-go basis from general taxation. There has been some form of NZ Superannuation since 1938 (and an age pension dating from 1898) and the electorate is committed to maintaining this form of public pension.[8] The second tier consists of voluntary private provision by individuals to enhance their standard of living in retirement. Some of the wealth observed by the Household Saving Survey is likely to have been accumulated by households to provide this second tier of retirement income, although the role of private provision generally in New Zealand has been rather limited.

The key feature of NZ Superannuation is that it is paid to everyone aged over 65 who meets a residency requirement,[9] at a standard amount that is unrelated to previous earnings. There is no income or asset test to determine eligibility. Recipients are also eligible for other forms of means-tested income support (including accommodation allowances), on the same basis as people of any age. Over 93 percent of people over age 65 receive NZ Superannuation. Because of this (almost) universal eligibility, O’Connell (2004) considers NZ Superannuation to be an example of a “Citizen’s Pension” – a basic amount payable to all citizens.

The level of NZ Superannuation benefits is reviewed each year, but legislation mandates that it has to be kept between 32.5 and 36.25 percent of the net average wage. This is usually described by ‘65 at 65’, that is, at age 65 a married (or cohabiting) couple will receive at least 65 percent (two times 32.5 percent) of the net average wage. The married person rate is the base rate for NZ Superannuation, and the rates for single pensioners living alone and single pensioners sharing accommodation are set higher to reflect the extra costs of maintaining either single-person or shared, non-cohabiting households. In 2003, the rate for a single person sharing accommodation was equivalent to 40 percent of the average weekly wage, while for those living alone it was equivalent to 44 percent (MSD, 2003).

Figure 1 – Average Total Weekly Incomes and Superannuation Rates in New Zealand
Figure 1 - Average Total Weekly Incomes and Superannuation Rates in New Zealand.

Several features of NZ Superannuation have favourable impacts on women, and thus are likely to affect household bargaining over retirement wealth. Indeed, Ginn et al. (2001) describe it as a “women-friendly” model of pension provision. First, because there are no earnings-related contributions, women receive the same payments as men even though their average incomes are lower and they have fewer years in the labour force. Figure 1 shows average weekly incomes for the employed adult population and for all adults. On average, women’s incomes are only 68 percent of men’s for the employed population (and only 61 percent for all adults). This contrasts with the gender neutrality in the payments made by NZ Superannuation. Second, the payments are financed from general tax revenues rather than some form of payroll tax such as national insurance or social security contributions. Because of the progressive New Zealand tax structure and the fact that women on average earn less than men and have greater life expectancy, women effectively pay less of the cost of NZ Superannuation and receive more of the benefit. Third, because each individual receives the pension in their own right, changes in marital status do not affect the access to or level of the pension. Thus, except for the adjustment for the different costs of two-person versus one-person households, there is no difference in the NZ Superannuation that married and single women receive. Finally, the higher rates for those living alone mean that older women are not economically disadvantaged by the fact that, due to their younger age at marriage and higher life expectancy, they are more likely to face higher housing costs (due to living alone) than are older men.


  • [7]This section draws heavily on O’Connell (2004).
  • [8]In a 1997 referendum, 92 percent of voters (with a turnout of 80 percent in a postal ballot) voted against replacing NZ Superannuation with a compulsory private savings system.
  • [9]A person must have lived in New Zealand for ten years since age 20, five of which must be since age 50.
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