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National’s ‘Pension Tax’ – Couples would need to save an extra $200 a fortnight to make up for losing two years of Superannuation

A couple aged 43 and under would lose $175,206 in super payments, after tax. To replace this, they would need to save an extra $196 each fortnight, assuming a 5% annual interest rate.

Fresh analysis by the New Zealand Council of Trade Unions has revealed that New Zealanders under the age of 44 would face an effective ‘Pension Tax’ of up to $200 a fortnight if National forms the next government.

NZCTU Economist Craig Renney said “No analysis of National’s plan to raise the age of qualification for superannuation by two years to age 67 has ever been provided by them.  

“National has a habit of not being upfront with voters about its plans and this latest example underlines again the real costs to working people of a National-led government.”

Using recently released data from the Pre-Election Economic and Fiscal Update, the NZCTU has quantified the impact of that change on Kiwi families.

 “A couple aged 43 and under would lose $175,206 in super payments, after tax. To replace this, they would need to save an extra $196 each fortnight, assuming a 5% annual interest rate.

“The maximum income tax cut for a couple under National’s tax plan is $102 a fortnight – meaning that they would be at least $94 a fortnight worse off. This means that they would need to save an extra $5,085 between them every year.

“Single people aged 43 and under would lose $113,885 after tax. To make up for that, they would need to save an extra $129 a fortnight in an account paying 5% annual interest. The maximum tax cut for a single person under National would be $51 a fortnight, meaning that they would be at least $78 a fortnight short.  

“This money from affected people and their families doesn’t buy them anything new. It just replaces the income they would have had if the pension age remained the same. This is money they won’t have for saving for a home deposit or meeting the cost of living.

“Working people deserve better from National. They are giving small tax changes with one hand yet taking even more back with the other and failing to tell voters the cost.”

Many Kiwis are not able to work an additional two years due to their health and the physical nature of their jobs.

Paramedic Geoff Hunt said this change would be unworkable.

“I love my job working for my community. But it’s mentally demanding, physical work that no one should have to be doing at 67. I don’t know how I would save an extra $100 a week to make up the difference.”

The Retirement Commissioner’s 2022 Review of Retirement Income Policies recommended against increasing the age of superannuation due to its disproportionate impact on Māori, Pasifika, women, and people with disabilities or chronic health conditions.

The Commissioner said the move would disadvantage certain demographics.

“Any increase to the age of people accessing NZ Super will only further disadvantage women, Māori, and Pacific People.”

Renney said “This is sensible advice, and our analysis lays out the real and significant financial costs to younger New Zealanders today from National’s ‘Pension Tax’.”


Note on the calculations:
To calculate the loss of superannuation payments, the CTU has taken the current after-tax rates of superannuation payments for couples and single people. We have projected these payments forward to 2047, when National’s superannuation age increase would be in full effect, based on the average rate of after-tax wage growth across 20 years (3.5%, according to Treasury’s Fiscal Strategy Model).

For the required savings calculation, we have assumed an average savings interest rate of 5% based on historical experience and deducted 30% tax.