Changes to the pension and retirement savings systems in Australia and New Zealand will affect retirees, workers and savers, and employers in both countries. Underlying the changes is one common demographic challenge – we have a growing proportion of old people and fewer working-aged people to fund their retirements.

Governments in both countries are working to make the retirement savings more fit for purpose. In New Zealand, they are increasing the weekly contribution rates to the KiwiSaver retirement savings scheme and in Australia, policymakers are increasing tax on those with high balances. Policymakers are also looking at how they can rein in the ballooning cost of paying a universal aged pension.

Australia: Payday Super commences

Due to commence on 1 July 2026 in Australia, Payday Super will require employers to make their staff’s superannuation payments on the same day as they pay their wages and salaries. It’s a major shift from paying super less frequently, such as once a quarter, and it will increase the number of employer superannuation contribution transactions from about 150 million a year to potentially half a billion, says Tony Negline CA, CA ANZ’s Australian superannuation specialist.

“That’s a big additional cost for employers, but it’s also a lot more stress on the payments system and data that super funds have to process,” he says.

Making superannuation contributions is a more complicated process for employers than paying a wage because a super payment requires data as well as money – details about who the member is, their tax file number and the status of the contribution. It will also create a cashflow issue for some employers, due to them having to make super payments sooner.

Another issue employers will have to deal with is what Negline calls “the inertia of employees”, meaning employees who change funds but don’t tell their employer. This then means the employer super contributions don’t go through and they have to chase their employees to find out about their new funds.

“We’re not opposed to Payday Super, the reason being that it is deferred wages and why should the receipt of those wages be delayed? But it has to be implemented fairly and it has to be implemented in a way that’s not going to trap employers in a cycle of non-compliance and penalties,” Negline says.

“Our preference would be that the super funds, the payroll firms and so on, and so forth had longer to change their systems to be ready to make Payday Super work properly from day one.”

Negline doesn’t expect the change will significantly reduce the super guarantee gap – the difference between the total amount of super employers should pay and the amount they do – because Payday Super won’t do anything to prompt employers to do the right thing. The gap currently sits at about A$5 billion out of around A$90 billion in annual super payments.

The A$3 million question

The Australian Government’s increase in tax on investment earnings on superannuation balances more than A$3 million has attracted a lot of criticism, including from CA ANZ. The change is not yet law, but the government plans to reintroduce the legislation to parliament this year for the change to take effect from 1 July 2026 and start taxing earnings at the higher rate from 1 July 2027.

Under the new regime, a superannuation account holder’s earnings made on the balance over A$3 million will be taxed at an additional 15%. Late last year, the government altered the proposal, agreeing to index the A$3 million threshold and to not tax unrealised capital gains. Even so, Negline says: “We remain opposed to this policy.”

While the government believes the tax will raise more revenue than it costs to administer, Negline says it will impose costs on others. “Even with these changes that the government announced, we think this change will be very, very expensive to administer,” he says.

Fund members will need to seek tax advice on how the changes might affect them, yet the law isn’t settled. Additionally, they will have to get their assets valued to provide a base for the tax calculations.

CA ANZ doesn’t object to the taxation of super, but Negline notes that it is a long-term investment and fund members receive tax concessions in exchange for locking their money away for a long time.

Aged pension eligibility

The third area of concern for CA ANZ regarding the proposed A$3 million threshold relates to deeming – the calculations Services Australia uses to determine a retiree’s earnings from their financial assets and hence their eligibility to receive the aged pension.

The calculations are based on a nominal percentage return from the assets. During the COVID-19 pandemic, the government cut the deeming rates to a lower rate of 0.25% and an upper rate of 2.25%. This had the effect of making more people eligible to receive the pension or to receive a larger pension.

The government is slowly starting to normalise the rates. From late 2025, it set the deeming rate at 0.75% for the lower threshold and 2.75% for the higher threshold. Negline says the government should have done this earlier to ensure the policy operated efficiently and it could save the revenue from paying lower pensions.

Australian SMSF tax exemption

The ATO updated its minimum pension payment rules for self-managed super funds (SMSFs) in 2025. Following an ATO ruling in June 2024, if an SMSF fails to make the minimum pension payment in one year, this permanently stops tax exemption status of the pension income until a formal restart. For the failed pension to be fixed, the member must consciously commute the pension and commence a new pension.

This will impose costs on the SMSF member. They might be required to re-calculate tax components for the restart of the failed pension, as well as for each benefit payment from the failed pension. Additionally, their financial adviser might need to issue a new Statement of Advice to incorporate the new pension.

Under the old rules, only that year’s tax-exempt status was lost.

The change means that SMSFs and SMSF members need to be doubly cautious about meeting the minimum pension payment obligations.

KiwiSaver contributions

In New Zealand, there will be several changes to the national retirement savings scheme, KiwiSaver.

The default contribution rate to KiwiSaver increased from 3% to 3.5% on 1 April this year with the second rise of 4% will be taking effect from 1 April 2028. The default rate applies to contributions from both employers and employees.

Last year, the government’s annual contribution halved from NZ$520 a year to NZ$260 a year and it is no longer available to workers with annual incomes above NZ$180,000, when the top tax rate kicks in.

The National Party, which is part of the current coalition government, has a policy to gradually increase the KiwiSaver contribution rate by half a per cent a year so it would hit 6% in 2032 for both employees and employers, matching Australia’s contribution rate of 12%.

The government also plans to relax the liquidity requirements for KiwiSaver investments to allow the scheme to make a wider range of investments such as infrastructure assets, whose long-term stable returns are much sought after by superannuation funds. But these are currently just proposals and whether they become policy will depend on the 7 November election outcome and the make-up of the next parliament.

KiwiSaver is currently optional. Workers are mandatorily enrolled when they start a new job but can opt out. Around 93% of workers are in the scheme.

The New Zealand First party (also part of the current coalition government) has a policy of making the scheme mandatory for all workers, but CA ANZ advocacy leader in New Zealand Peter Vial FCA notes this raises an equity issue. “We’ve got this awful cost-of-living problem in New Zealand, and people on low incomes are struggling to make ends meet and pay for food and rent, let alone save for their retirement,” he says.

Additionally, as contribution rates go up, this will make KiwiSaver even more unaffordable for low-income earners. “It’ll just compound the inequality,” Vial says.

A means-tested pension?

Another major issue in New Zealand, and dependent on the election outcome, is the eligibility age for National Superannuation, the country’s aged pension. All Kiwis can receive the aged pension from age 65 as there is no means testing as there is in Australia.

But there is a growing recognition that this policy is unsustainable as the population ages.

Vial notes that in 1965 New Zealand had seven people of working age population for each superannuant. By 2025, that had dropped to four and by 2065 there will only be two people of working age for each superannuant.

Spending on National Superannuation currently equates to around 5% of GDP and is projected to grow to 8% by 2065.

“That’s obviously unsustainable, and the difficulty for politicians is it’s difficult to change the universality of the payment and the age of eligibility,” Vial says.

But not doing so is equally unpalatable, as it would mean eventually increasing income tax or raising the GST rate (one estimate predicts GST would have to double, to 30%) or slashing spending on government services.

The National Party has a policy of gradually increasing the pension age to 67 from 2040. The ACT Party (the third coalition government party) has a policy of more aggressive age increases.

These sorts of policies have been unpopular in the past, but Vial says there has been a shift in sentiment as there is a growing recognition that something needs to change. “In the last five or six years, people have become much more aware of it becoming a burning issue,” he says.

Certainly, CA ANZ’s New Zealand members are aware of the problem. A recent survey found that 94% were either very or somewhat concerned about the National Superannuation settings and 58% said the eligibility age should be increased.

Time will tell

When our national pensions started in 1898 in New Zealand and in 1909 in Australia, the average life expectancy was 57 years. A very modest pension kicked in at age 65. It was means tested, only available to people with at least 25 years of residency and only paid to ‘deserving’ citizens.

Today, Australians and Kiwis have a life expectancy of 80–85 years: an astonishing success story for science, health care, sanitation and education. What governments and workers do in terms of retirement age, savings planning and pension reform in the next 25 years will decide how we pay for these extended golden years.

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Our ageing populations

When looking at age demographics, Australia and New Zealand both have a beehive-shaped, constrictive population pyramid, reflecting lower birth rates and a higher proportion of working age and elderly people. Compare this with the triangular pyramid of a country such as Pakistan, which is described as a young population and has a median age of 20.6 years. Australia’s median age is 38.3 years and it’s 37.7 years in New Zealand.

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