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119 years of the New Zealand Pension

New Zealand Superannuation has been a hotly debated topic in recent years. Our ageing population has put into question how New Zealand is going to afford to look after its older people, if we can at all? How have we gotten to this point – let’s take a look:

1890s

1898 saw the creation of the first publicly provided pension for “persons of good character” aged 65 and over.  Although the pension was means‐tested and income‐tested, additional income from insurance products from the likes of Government was allowed.  The first pension payments (£18) were equal to about one third of a working man’s wage, and were paid to men and women. To qualify, pensioners had to prove they were 65 years old and had lived in New Zealand for at least 25 years. A range of discretionary and character judgements also dictated eligibility. For example, a pension could be withheld if a pensioner was imprisoned, found drunk, or deserted a spouse and family. Less than 40% of eligible people took up the offer of a pension.

For Māori, whanau remained the traditional means of support for the elderly. While the 1898 pension was available to Māori, in practice few Māori received it, partly due to difficulties in proving their age and income. Those Māori who did receive the pension often received it at a lower rate than their Pakeha counterparts.

Chinese and other ‘Asiatics’ were ineligible for an old-age pension until 1936 even if they met the age and residency criteria.

1930s

Michael Joseph Savage

In response to the social and economic distress of the Great Depression, the Labour government led by Prime Minister Michael Joseph Savage passed its far-reaching Social Security Act. This act set up a version of social welfare that was in place for the next 50 years.

In regards to pensions, this act provided a means-tested old-age pension for those aged 60 and over, and universal superannuation for all New Zealanders aged 65 years and over.

1970s

The mode and level of state support for the elderly became a political hot potato after the Royal Commission of Inquiry into Social Security reported its findings in 1972. (The Commission had reviewed existing social security policy and whether or not it was meeting the needs of existing, as well as newer, categories of beneficiaries.)

The Labour and National political parties subsequently promoted a different model of support for the old.

Robert Muldoon

In what commentators describe “an irresistable bribe for voters”, National party leader at the time, Robert Muldoon promised to replace the Labour government’s compulsory contributory superannuation scheme with an extremely generous one funded by taxes. ‘National Superannuation’, as it was known, was a universal pension paid to everyone aged 60 and over who had been resident in New Zealand for ten years. It was set at 80% of an average wage. Recipients’ assets and incomes would not be assessed; in fact pensioners could still work if they wished.

The cost of this ill conceived promise proved to be enormous at a time when government’s cup did not runneth over. By 1978-1979, National Super was already costing the country 6.9% of its GDP.

1990s – 2000s

With “baby boomers” fast approaching their 60th birthdays, the Government realized they needed to act. In 1992, the age of superannuation eligibility was raised to 61, gradually increasing to 65 between 1993-2001.

KiwiSaver was introduced by the Fifth Labour Government in July 2007 as a voluntary retirement savings scheme on top of New Zealand Superannuation.

Currently

At 1 December 2011, a person may be able to get New Zealand Superannuation if they:

  • are aged 65 or over
  • are a New Zealand citizen or permanent resident
  • normally live in New Zealand at the time they applied.

They must also have lived in New Zealand for at least 10 years since they turned 20 with five of those years being since they turned 50. Time spent overseas in certain countries and for certain reasons may be counted for New Zealand Superannuation.

New Zealand is one of only four countries that have flat-rate universal superannuation, the others being Canada, Denmark and Russia. One quarter of our core operating expenditure goes on superannuation.

So, with the expected number of people eligible for Superannuation to reach 1,285,000 in 2038 – can New Zealand sustain its 119-year-old pension scheme?

About Eve Williams

Eve Williams
Eve Williams is the Sales, Production and Social Media Administrator for Eldernet. She has been working for Eldernet for a number of years on a casual basis but is very excited to grow in her new full time role within the company. A recent graduate of Canterbury University with a degree in Psychology and History, her interests span far and wide.

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