Here at Simplicity, we are here to help make our members richer and smarter with money. And we love a good conversation - even a good challenge! So when we received some constructive feedback off the back of Chief Economist Shamubeel Eaqub’s recent RNZ interview, we thought it would be a good idea to provide some context around his comments, and explain the facts behind his interview answers.

Update from Shamubeel:

NZ Superannuation is a transfer from current taxpayers to those who are over the age of 65, defined in the New Zealand Superannuation Act and Retirement Income Act (which includes residency requirements to qualify for it, and to continue receiving it) and administered under the Social Security Act (that is administered as social security, or welfare). These are written in our rules and regulations.

The HYEFY 2024, published in December 2024, shows that the biggest government expense area was welfare at $44.6b in the June 2024 year. The detailed table (Table 5.2) entitled ‘Welfare benefit expenses’ shows the biggest welfare cost is New Zealand Superannuation at $21.6b. NZ Superannuation is welfare in rules and regulation, and how it is described in government accounts and communications.

NZ has a pay-as-you-go approach, meaning the NZ Superannuation payments come from current taxes. The taxes we pay today pay for many things, including NZ Superannuation payments for those who are retired today. 

This means that the taxes we pay during our working lives are not saved to fund NZ Superannuation payments made upon our own retirement; rather it is based on the hope that there will be enough tax from future generations to pay for this. If we wanted to fund our own retirements in advance through our working lives, we would have to pay a lot more tax, or save differently (for example through KiwiSaver - one of the reasons the scheme is in place today). 

Those who think that having worked and contributed to New Zealand means they have funded their NZ Superannuation are unfortunately not correct; they have only met the obligation to the cohort of people that were retired during the period they were working. These new retirees are now requesting the future generations to do the same (even though there are relatively speaking fewer of them and the burden is worsening with every passing year).  

Now we totally understand that this is a pretty blunt view on the whole thing, and general narratives around Super over the past decades have tended to support the “pay taxes, fund my super” argument. But unfortunately this is one of those common misconceptions, and we ideally want to help set people straight where the facts dispute the common narrative!

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