Retirement Incomes in New Zealand

Abstract

New Zealand has a unique approach to retirement income provision. The state pension arrangements have the advantage of being very simple and easy to understand and administer. While there are numerous issues associated with the ageing of the population that may require modification to the parameters of state provision in the future, there is little political disagreement about the basic design of the state pension. In ensuring universal coverage with a flat rate taxable pension for everyone without the need for a contributions record, New Zealand has prevented elderly poverty to date. Supplementary private provision has been unsubsidised and recent debate has focused on the need to encourage more private saving particularly through work-based schemes. Nevertheless there are numerous advantages to New Zealand's tax neutral approach, which may offer lessons to reformers in other countries. With some caveats, New Zealand appears well placed to weather the increased expenditures associated with the retirement of the baby boomers.