The New Zealand Pension System in an International Context: An Outsider's View

Einar Overbye

New Zealand is one among a very limited number of industrialised countries that have abstained from introducing mandatory earnings-related pensions for the working population.

This paper traces the development of old-age pension politics in other industrialised countries from two basic starting points: the “contribution” approach, whereby workers contribute money and there is a connection between what an individual pays and gets out of the system, and the “assistance” approach, whereby people are provided with tax-funded means-tested benefits.

Despite these different starting points, European and Anglo-American countries have converged towards a dual mandatory pension structure, in which the working population receives wholly or partly contribution-based second-tier pensions, while the non-working population receives tax-financed supplementary benefits. New Zealand is the main deviant case in this pattern of convergence.

This paper looks at why this has happened, starting with introduction of the non-means-tested National Superannuation in 1976, and ends with a discussion on the likely future developments in New Zealand in the light of recent pension developments in the Scandinavian countries in particular. The author’s “outsider’s guess” is that, despite the weakening of unions in New Zealand, this country will follow the union road to broad-based occupational superannuation schemes.