Whether the pension age should move from 65 to 67 has been argued over in New Zealand for a decade. Two research papers released by the Treasury on 30 July 2026 suggest that 67 would barely dent the problem it is usually offered as the answer to.
The papers are Analytical Note 26/05, by Andrew Binning, Murat Özbilgin, Christie Smith and Hanna Vu, and Analytical Note 26/06, by Binning, Smith and Vu. Both were published together as background to the Treasury’s 2025 Long-term Fiscal Statement from September last year. Both carry a disclaimer that the views are the authors’ own and not necessarily a Treasury position, and the scenarios are described as analytical exercises rather than policy proposals.
The headline number is the one on eligibility age. Working through the Treasury’s overlapping generations model, the authors calculate what age would hold spending on New Zealand Superannuation steady as a share of the economy. Their answer is that the age of eligibility “must increase from 65 in 2025 to 72 by the year 2065, and to 75 in 2100”.
What the model is holding steady
Share of the economy is doing a lot of work in that sentence, and it is worth being clear about what it means. The model starts with gross pension spending at 5.6 percent of gross domestic product and net spending, after the income tax that superannuitants pay on their pension and other income, at 4.9 percent. Holding those ratios flat does not mean freezing the dollar cost. It means the pension bill can keep growing, in dollars, at the same rate as the economy underneath it. Anything faster is the part the modelling is trying to stop.
The reason it grows faster is arithmetic rather than policy. The share of New Zealanders aged 65 and over is projected to rise from about one in six now to one in three by the end of the century. The number of working age people set against each person aged 65 and over falls from roughly four to two over the same period. People are also collecting the pension for far longer than the scheme was built around. The paper reproduces Stats NZ life tables showing that a man reaching 65 in the early 1950s could expect about another 12.8 years, and a woman about 14.8. The 2025 projections are 19.9 years for men and 22.1 for women.
Against that, each extra year of eligibility age buys less than most people would guess. The authors put the saving at between 0.33 and 0.37 percentage points of GDP a year in gross terms, and between 0.23 and 0.25 percentage points net of tax, depending on what is assumed about how many older people keep working. Set against a starting bill of 5.6 percent of GDP, one extra year of eligibility age removes roughly a sixteenth of the pension cost. Taking the age all the way to 70 lowers gross costs by between 1.64 and 1.84 percentage points of GDP by 2065, and net costs by between 1.15 and 1.23 points.
That is why the stabilising age lands at 72 rather than 67. It also cuts across a popular idea. Several European countries, among them Denmark, Estonia, Italy, the Netherlands and Spain, now tie their pension age automatically to life expectancy. The authors tested that rule here and found it “would not be sufficient to stabilise gross pension spending to GDP at current levels”, because the size of the cohorts moving through matters as much as how long they live.
How the gap gets funded changes the answer again. The 72 figure assumes labour income tax rates rise to balance the books. If the money is raised through GST instead, the required age climbs to 74 by 2065 and 78 by 2100. Consumption taxes fall on retirees as well as workers, so the pension has to stretch further and the age has to move further to compensate.
The other lever is how the pension is adjusted each year
The second paper looks at indexation, which gets far less attention than the age but moves more money. New Zealand Superannuation is adjusted annually for the consumers price index, but with a wage floor attached. The married couple rate must sit between 66 percent and 72.5 percent of the after tax average weekly wage, and that earnings benchmark takes precedence over the CPI adjustment. A single person living alone gets 65 percent of the couple rate and a single person in shared accommodation gets 60 percent. In practice the wage link is what drives the long run cost, because wages usually grow faster than prices.
Switching to straight price indexation would leave pensions about 25 percent below the baseline by 2065 and about 37 percent below by 2100, in the model’s terms. A mixed rule, averaging price and wage growth in the way Switzerland does, would leave them about 11 percent lower by 2065 and 16 percent lower by 2100. Those are large numbers arrived at without anyone ever voting to cut the pension.
The paper also lines up two packages that reach almost the same fiscal destination by different roads. Price indexation on its own, and a combination of mixed indexation with the age lifted to 67, both land pension spending at around 5.6 percent of GDP by 2045 with an average labour income tax rate near 25.5 percent. The books balance the same way. The people who carry the cost are not the same people.
Who pays and who gains
Generations born decades from now do better under every reform scenario, because they inherit lower tax rates, a bigger capital stock and higher wages. People already retired or close to it do worse, because their pension shrinks and they have little time left to save around it.
Within any given generation the split runs along income lines. As the indexation paper puts it, “higher-income individuals are less affected by pension reductions and gain more from reduced taxes and a stronger economy, amplifying disparities between low- and high-income households”. People who reach 65 with little beyond the pension feel a change to it in full. People with KiwiSaver balances, rental income or a paid off house feel a fraction of it, and collect the tax cut on the other side.
The authors are also blunt about timing. “Pre-announcing policy changes and spreading changes out over time reduces the burden felt by people from these changes because they have more time to adapt their lifetime behaviour, including consumption, saving, and labour supply,” they write. Notice, in other words, is not a courtesy. It is part of what makes a change affordable for the people it lands on.
Economists who read the papers landed in much the same place. Simplicity economist Shamubeel Eaqub, who was part of the review team for the Treasury, told RNZ that “if you think about the levers that we need to pull to make superannuation sustainable, indexation and raising the age of eligibility don’t do very much … it creates some benefits, but it’s at the margin”. ANZ senior economist Miles Workman told RNZ that “maintaining the status quo isn’t cost-free either”, and that without changes the rising cost of pensions and health “would ultimately need to be funded through higher taxes, lower spending elsewhere, higher debt, or some combination of all three”.
None of this is government policy. The age of eligibility has been 65 since 2001. The other lever pulled in that era was pre-funding, when Michael Cullen set up the New Zealand Superannuation Fund out of the surpluses to smooth the cost across generations. A National led government announced in 2017 that it would raise it to 67 by 2040, and that decision was reversed by the Labour and New Zealand First coalition in 2018. National’s current position is to hold the age at 65 until 2044 and then lift it gradually to 67. New Zealand First has campaigned on keeping it at 65. Voters lean the same way, with an RNZ Reid Research poll in July finding 58 percent wanted the age left at 65.
What the Treasury papers add is a sense of scale. The gap between what is being debated and what the arithmetic asks for is not a rounding error. It is five years of eligibility age, or a rewrite of the indexation formula, or a tax rise, or some mix of the three. Ahead of the election you can compare where the parties stand using our voting tool.
What would you rather see happen, a later pension age, a slower annual increase, or higher taxes to pay for the pension as it stands? Tell us in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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