Twenty-one billion dollars and climbing
New Zealand Superannuation cost $21.6 billion in 2024, more than five times the job seeker benefit. It is forecast to hit $29 billion by 2028/29. Treasury’s own numbers show Super will consume 21.35% of all taxation revenue by 2036/37, up from 16.63% in 2022/23. On a longer horizon, net expenditure is projected to rise from 4.3% to 6.5% of GDP by 2068/69.
The demographic maths is brutal. In 1970 there were seven workers for every retiree; today there are four; by 2060 there will be two. In January 2025, economist Cameron Bagrie argued that means-testing is inevitable, describing a “perfect storm” of more retirees and fewer taxpayers. Nothing in the intervening months has weakened that argument.
Retirement Commissioner Jane Wrightson has described NZ Super as equivalent to a lump sum of around $560,000 when factored into total retirement income. That is the single largest retirement asset most New Zealanders hold, and unlike KiwiSaver or property, it currently has no hedge and no guarantee beyond political convention.
Three models, three different traps for business owners
Not all means-tests are created equal, and the design matters enormously for anyone with business assets.
The bluntest option is an income threshold administered through WINZ. Te Ara Ahunga Ora’s 2024 issues paper outlined eight policy options including asset-based tests and estate recovery. An asset test would pull business equity, property, and investment portfolios into scope, putting trust structures under immediate scrutiny.
The more sophisticated proposal comes from Professor Susan St John of Auckland University’s Retirement Policy and Research Centre. In March 2025, she proposed converting NZ Super into a tax-free basic income grant with a separate progressive tax schedule for other retirement income. Treasury modelling confirmed at least 15%, or $3 billion, of net Super costs could be saved with little impact on low-income retirees. Her academic working paper put the fiscal savings range at 8-24% depending on tax rates chosen.
A Kiwiblog analysis this month modelled a 50% abatement rate on retirement income, concluding that universal Super achieves similar outcomes at lower administrative cost. But the post also acknowledged that raising the eligibility age, the alternative reform, is “politically impossible while NZ First holds balance of power.”
The business exit problem nobody is pricing
For the business owner planning to sell at 65, means-testing creates a specific and underappreciated set of risks.
A lump sum from a business sale in the year of retirement could trigger an income test and eliminate Super entitlement entirely. An owner who retains a directorship or draws dividends post-65 faces potential clawback even if they consider themselves retired. If the test includes assets, as Australia’s does, the company itself becomes a liability for Super purposes.
The current after-tax Super rate is $519.47 weekly for a single person. The no-frills metro retirement budget is $687.84 weekly, a $168 weekly gap most retirees fill from savings or business drawdown. Under a means-test, that very drawdown could be the thing that disqualifies them.
The rational response, if means-testing enters serious political debate, is to complete business succession before any cut-off. That compresses exit timelines and potentially depresses sale prices as supply increases. It is not avoidance. It is exactly what happened during the 1985-1998 surcharge, the last time New Zealand tried a de facto means-test, and it is exactly what would happen again.
The savings base cannot absorb the shift
Total KiwiSaver funds under management reached $123.1 billion by March 2025, with 3.39 million members and an average balance of $36,349. But 17% of members aged 51-65 have less than $10,000 saved, and 40.6% of all members are not currently contributing. For business owners who structure income through companies and trusts, KiwiSaver balances dramatically understate actual retirement wealth, making any means-test design fiendishly complex.
The government has been tightening means-testing across the welfare system while leaving Super untouched. That anomaly has a shelf life. Defenders of universality note that NZ Super is the eighth least expensive pension in the OECD as a proportion of GDP. But that ranking reflects current demographics, not where the trajectory is heading.
The advice industry will not wait for legislation. The moment means-testing moves from academic discussion to political signalling, accountants and financial advisers will begin restructuring client assets. Business owners who are paying attention will start planning now. Those who are not will discover, too late, that the $560,000 they were counting on was never really theirs to count.
Sources
- Newsroom: NZ’s means-testing creep (2025-06-09)
- Newsroom: Raising retirement age poses a sharp two-edged challenge (2026-02-15)
- BusinessDesk: Means testing super is inevitable (2025-01-06)
- Newsroom: NZ Super’s urgent reform needs to be granted (2025-03-11)
- Auckland University PIE Working Paper: NZ Superannuation as a basic income (2025-03-05)
- Kiwiblog: Means Tested NZ Super (2026-04)
- Treasury OIA Response: NZ Super Spending Forecasts (2023-04-17)
- Te Ara Ahunga Ora: NZ Super Issues and Options (2024-02)
- FMA: KiwiSaver Annual Report 2025 (2025)
- Te Ara Ahunga Ora: KiwiSaver Balances at 31 Dec 2024 (2025-02)
- Financial Advice NZ: Retirement Expenditure Guidelines 2024 (2025-01)