The quiet admission
Finance Minister Nicola Willis has acknowledged what Treasury has been saying for years: the NZ Super system is fiscally untenable under current settings. The NZ Super Fund will cover at most 20% of future superannuation costs, and the Government will make its first withdrawal from the Fund in 2028, five years earlier than previously forecast.
Willis is not freelancing. She’s catching up to what the numbers already show. Treasury’s BEFU 2025 model reveals that the capital contribution calculated for 2025/26 was just $61 million, and even that was redirected to the Elevate NZ Venture Fund. Zero new capital went into the Super Fund this fiscal year. The piggy bank is not being filled even as the first withdrawals approach.
A fifth of all tax revenue, gone before it starts
The crowding-out story is the one that matters for business. Treasury OIA data from April 2023 projects NZ Super spending will consume 21.35% of total taxation revenue by 2036/37, up from 16.63% in 2022/23. In dollar terms, that’s $45.29 billion out of $212.17 billion in projected tax.
ANZ chief economist Sharon Zollner put it plainly in March 2026: NZ Super spending has climbed from “just under four per cent of GDP 20 years ago to just over five per cent now and under current settings, we’ll go to around eight per cent of GDP over the next 40 years. That’s obviously a lot of money we’re not spending on something else.”
That “something else” includes roads, hospitals, schools, broadband, tax cuts, and R&D incentives. Every automatic increase in Super spending tightens the fiscal space available for everything a growing economy actually needs.
The demographic wall is already here
In November 2024, Treasury chief economic adviser Dominick Stephens warned that the Government’s books are on “an unsustainable trajectory” unless policies change. The ratio of working-age people to retirees has collapsed from seven-to-one in the 1960s to four-to-one today, and will reach roughly two-to-one within 50 years.
Stephens also noted that New Zealand has the highest basic pension paid out of general taxation relative to gross earnings among OECD countries, paid universally regardless of other income. It is an extraordinary outlier among developed economies.
Milford Asset Management CEO Blair Turnbull was blunter in March 2026: “The truth is, as hard as we don’t like this, we just cannot afford the superannuation system because we don’t have the workers.”
The productivity link nobody talks about
Here is where the story connects directly to business competitiveness. Former cabinet minister David Parker argued in March 2026 that he sees “no credible way forward for New Zealand to lift our productivity unless we match the Australians in their better savings rate.” Australia’s compulsory superannuation system has built deep capital markets that fund domestic investment. New Zealand ranks 27th of 37 OECD countries on productivity and 33rd on savings. That pairing is not coincidental.
Low domestic savings means less capital available for New Zealand businesses to borrow, invest, and grow. The Super system simultaneously drains the public purse and fails to generate the private capital pool that might compensate.
In February 2025, economists broke ranks
A group of prominent economists publicly called for structural reform. Infometrics principal economist Brad Olsen captured the absurdity: “New Zealand spends more on NZ Super than on education. Where are our priorities? It sure as hell isn’t spending on getting people smart, so they can do better jobs in life. We’re paying people to be old at the moment.”
ANZ’s Zollner asked why New Zealand seems “incapable” of the mature conversation almost every other OECD country has already had about pension eligibility age.
NZ First is the handbrake, KiwiSaver is the workaround
The coalition agreement with NZ First prevents any eligibility age increase, which means the Government’s response is limited to KiwiSaver settings changes. Economists broadly regard this as insufficient. The OECD called for linking eligibility age to life expectancy back in 2022, warning that gross government debt could rise from 49% of GDP to around 140% by 2060 under unchanged policies. National’s own policy commits to no change until 2044.
Retirement Commissioner Jane Wrightson cautioned in February 2026 that raising the age is not a clean fix either, noting fiscal savings would be offset by extra support needed for those who cannot work longer. The equity complications are real. But they do not change the arithmetic.
What business owners need to understand
The fiscal trajectory means tax relief is structurally constrained for the foreseeable future. Infrastructure spending will continue to lag behind need. Capital markets will remain shallow by OECD standards. And the political system has chosen to defer the hard decisions until the 2040s, by which point the dependency ratio will have deteriorated further.
For any business owner planning a decade ahead, the implication is clear: do not expect the state to provide the infrastructure, tax settings, or capital environment your business needs. The money is already spoken for.
Sources
- Finance Minister Nicola Willis signals KiwiSaver changes amidst Superfund withdrawal announcement
- Treasury bangs the drum on ‘unsustainable’ superannuation (2024-11-22)
- Official Information Act Response: Superannuation Spending as Percentage of Tax Revenue (2023-04-17)
- Super costs force choices (2026-03-03)
- Prominent Economists Call For Superannuation Overhaul (2025-02)
- OECD to NZ: Raise pension age to prevent Super shock (2022-01-31)
- Raising retirement age poses a sharp two-edged challenge (2026-02-15)
- Retirement age will rise to cover superannuation cost, investment company predicts