For two close, culturally similar and often friendly neighbours, Australia and New Zealand nevertheless manage to go their different ways across any number of dimensions, from accents to voting systems.

Superannuation is another good example. In Australia, the key element is investment into superannuation schemes funded by compulsory employer contributions, with the back-up option of a state-funded pension subject to means tests. In New Zealand, it is the other way around, with the key feature being a universal, state-paid pension, non-means tested, with the back up being voluntary contributions into KiwiSaver investment funds. (See below for a brief summary.)

And it raises the inevitable question: who’s doing it best? Do we even know what is the best way to fund retirement over the longer haul?

In favour of Aussie super

Currently it looks as if opinion is moving towards the Australian way of doing things. One dramatic and quite surprising example in June 2026 was the decision by New Zealand’s National Party – not historically a strong supporter of KiwiSaver – to campaign on bringing in a compulsory KiwiSaver system, with minimum combined employer and employee contributions going up to 12%, the same contribution level as Australia’s. The new policy also proposed raising the age of eligibility for the state pension to 67 by 2044, again aligning with Australian practice.

And you can see why opinion is trending that way. There is a lot to be said for a system which results in individuals building up large financial resources of their own and not being beholden to government IOUs. People look at the money piling up in Australia’s super funds and see larger and deeper financial markets emerging. Plus, it helps curtail the cost to the Australian taxpayer of the state pension as more people hit the means-test levels which abate eligibility for the scheme. These are perceived advantages of the Australian system; some folks would add in some perceived downsides to the New Zealand system, notably the open-ended universality of payment.

The case for the NZ pension

But the argument is not a complete slam dunk. The self-reliance point is certainly a good one. But the deeper capital markets, cost containment and universality arguments are more debatable.
On the capital markets point, there is still no knock-out evidence that Australian superannuation funds have raised the national level of savings. If they haven’t, and have merely changed the sectoral allocation of the same amount of capital, then the fact that the share market or the venture capital market is awash with liquidity has to be counterbalanced by some other financial market having less capability than before. If, for example, super funds are not very fond of boring old bank deposits, banks’ lending to businesses and consumers will be constrained. It’s not so obvious that, net, the country is better off.

The cost containment argument can be overdone too. It is true that on the New Zealand Treasury’s long-term forecasts, the fiscal cost of super will rise from around 5% of GDP now to about 8% of GDP by 2065. But I’m tempted to reply, so bleeding what?

For one thing, this wouldn’t be in the least bit unusual or unaffordable by international standards. The Organisation for Economic Co-operation and Development (OECD) reckons that across its member countries, public spending on pensions is already 8.1% of GDP.

For another, let’s recall the purpose of the state pension in both countries. It’s to prevent hardship and to enable a pretty basic standard of living. Neither the Australian nor the New Zealand state pensions offer any kind of luxury in retirement. You won’t be going on any cruises down the Danube. Heck, you’ll be lucky to go up the Parramatta River from Circular Quay. As independent authorities in both countries have established, you need significantly more than the state pension to have any kind of moderately generous lifestyle in retirement. If it takes 8% of GDP to do the minimum, then I say pay it as a civilisational gesture of support for our elders.

A universal benefit?

As for the universality argument, that can be pushed too hard as well. Yes, it does look odd to be paying New Zealand Superannuation to people who do not need it, doesn’t it? But on the other hand, you’re completely avoiding the extraordinarily expensive exercise of administering income and asset tests across literally millions of people. And maybe it’s just a typically egalitarian New Zealand perspective, but there’s something to be said from a social equity point of view in favour of a system that pays everyone the same, when compared with a contributions-based system which rewards those who earned the most over their careers.

Another benefit of the universality of the New Zealand system is that it provides protection against governments reneging on their current promises. If you are dependent on New Zealand Super to get through your retirement years, you do not want a ‘welfare bashing’ or recklessly ‘austere’ government tearing up the contract you had relied on. Your wealthier compatriots who also receive the payment are more likely to join you in the trenches to resist any cutbacks.

Change, at what cost?

Maybe New Zealand will indeed continue to drift closer to how Australia does things. Maybe some future, flinty-eyed New Zealand finance minister will focus more on targeting. If so, they’d better be careful. A wee while back, my wife was in the queue at the supermarket checkout. The old duffer in the queue ahead of her had his bank card declined and started to put back some of his purchases. My wife said, ‘Don’t be silly,’ and paid his bill. He was embarrassed. She was embarrassed. We don’t need any more of that happening.

How the systems work

Australia relies mainly on compulsory, private super. Employers now pay 12% of earnings into taxed, concessional funds, with voluntary top-ups allowed. Benefits can generally be accessed from 60, with tax-free withdrawals in retirement. A means-tested Government Age Pension remains as a safety net, available from age 67.

New Zealand is the reverse. NZ Super is the main support, paid from age 65, taxed, wage-linked and not means tested. To help meet future costs, New Zealand also runs the NZ Super Fund. Its private KiwiSaver scheme is voluntary, with automatic enrolment, employer and member contributions, modest tax advantages, and far smaller balances than Australia’s super system.