With the Hibiscus Coast, like much of New Zealand, facing an ageing population, economist Susan St John has introduced a fresh approach to pension reform aimed at reducing costs while supporting those who need it most.

In her recent paper, New Zealand Superannuation as a Basic Income, St John, an honorary associate professor at the University of Auckland, explores how New Zealand's superannuation system can be reworked to address the financial pressures ahead.

St John, who is part of the University’s Pensions and Intergenerational Equity Hub, highlights the economic challenges posed by the country’s rapidly ageing population.

“The idea behind the proposal is to free up funds for those in need. More retirees have inadequate savings, are still renting, or are paying off mortgages. Many organisations, including foodbanks, are alarmed by rising poverty among older people, while aged-care facilities will struggle with the surge in demand,” she says.

St John reviews several potential cost-saving measures, including raising the pension eligibility age.

However, she argues that this approach would be “an ineffective tool that harms the most vulnerable while leaving well-off retirees untouched.”

She also dismisses cutting the rate of New Zealand Super, calling it “another highly unattractive option that would lead to disastrous levels of poverty among older people.”

Instead, she proposes a more targeted solution: clawing back superannuation from top earners to generate additional revenue for critical areas such as aged care, education, poverty reduction, and climate change.

Her proposal introduces the New Zealand Superannuation Grant (NZSG), a universal, non-taxable weekly payment “set at the current net amount received by those with no other income.”

St John argues that transforming the pension into a basic income could achieve significant savings with minimal harm compared to other options.

The NZSG would ensure a basic income floor for all people aged 65 and over, regardless of their other income.

“Whether other income is from paid work or investments, and whether it reduces or disappears, the right to the basic income floor of the NZSG would remain,” says St John.

Under realistic scenarios, St John suggests that the proposal could save “at least 15 percent or $3 billion of the net cost of New Zealand Superannuation (NZS) per annum with little impact on the majority of low-income retirees.”

The NZSG system, according to St John, would be simpler and more efficient than other forms of clawback, such as the welfare-type income test or the 1985 surcharge.

She notes that because the NZSG “is consistent with current arrangements that don’t require any retirement test, there would be little disincentive to earn extra from paid work.”

St John also suggests that once established, the NZSG could be expanded as a basic income to other groups, such as those in their 60s receiving the supported living payment.

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