New Zealand is facing mounting financial pressure as its population ages, with an increasing number of people over 65 and a declining workforce to support them. Experts warn that without careful, gradual reforms to retirement income policies, rising living costs and insufficient savings could leave many older Kiwis financially vulnerable.
Our ageing population
Financial hardship awaits New Zealand if the retirement income policies remain unchanged, an NZIER report warns. The Retirement Commission-backed report found that falling birth rates and the rising life expectancy mean the workforce will shrink despite the expectation that Kiwis will work beyond 65.
“While the number of people under 40 will remain the same as today, the number of people over 40 will increase by a third, and the number of people over 65 will increase by about a half,” senior economist and report author Adrian Katz said.
He says migration will become the main driver of population growth. “With the global population aged 65 and over expected to increase from 10% in 2025 to 16% by 2050, the demand for migrants will rise. New Zealand’s migration levels will depend on its ability to attract skilled workers amid growing competition.”
A smaller workforce means an increased tax burden for younger New Zealanders, which could lead to rising taxes, reduced public services, and growing debt.
“Whatever the approach, moving along the spectrum from pay-as-you-go towards savings-based creates a double burden on the working-age population, who must pay for current retirees as well as prefund the increased costs of future retirees. The costs of transition will rise as the population ages.”
He says that people need time to adjust and that retirement income policy settings significantly impact people’s consumption and savings decisions throughout their lifetimes, so changes should be gradual and announced well in advance. “Thoughtful, planned, and reliable adjustments will help ensure a coherent and sustainable system while minimising disruption and costs.”
In 2022, Stats NZ reported that one million New Zealanders would be 65 years or older by 2028. The number of people aged 65 and older is increasing by approximately 80 people per day, according to Hamish Slack, population estimates and projections manager.
“While population ageing is not new, it will really accelerate over the next decade. The increasing number and proportion of older people in the population have implications across New Zealand’s society,” he said.
Bridging the gap
Amid these trends, Westpac New Zealand is urging employers to continue making KiwiSaver contributions for those aged 65 and over, even though government contributions end then.
Nigel Jackson, Chief Executive of BT Funds Management, Westpac NZ’s KiwiSaver Scheme provider, says continuing employer contributions could make a meaningful difference to people’s retirement savings.
“Over the past three years, 54% of our KiwiSaver customers aged 65 and over have continued to make contributions to their accounts – but just one-third of this age group have received employer contributions in that time,” he says.
With nearly a quarter of adults over 65 still working, often because they cannot afford to retire, continued contributions could significantly boost their KiwiSaver balances during critical final working years.
The suggestion comes as the default KiwiSaver contribution rate is set to rise to 4% for both employees and employers from 2028. Westpac also notes a fairness concern: older workers performing the same work as younger colleagues should receive equal benefits.
Recent Westpac customer research highlighted that saving enough for retirement is something Kiwis are worried about, with more than 60% saying they don’t think Kiwis are saving enough.
Of those surveyed, 70% also felt KiwiSaver should be compulsory, and 68% believed employers should increase their contribution rates.
Compounding living costs
Rising living costs are compounding retirement challenges. The New Zealand Seniors Quality of Life Report 2025, conducted in partnership with consumer research group MYMAVINS, surveyed over 500 Kiwis aged 50 and older. It found that 76% of seniors are affected by rising living costs, with more than half reporting that these pressures negatively impact their quality of life.
Everyday essentials such as groceries (52%), transport (40%), and travel (49%) are increasingly difficult for older Kiwis to afford. Many have cut back on social activities (34%) or reduced social interactions (30%) due to financial constraints, which increases the risk of isolation and reduced wellbeing.
The report also highlights healthcare concerns. Over half of seniors surveyed cited healthcare costs as a major financial worry, and nearly half reported long wait times for specialist care or hospital procedures, averaging 108 days. Some seniors are even delaying medical care due to costs, a trend that poses long-term risks to their health.
Karen Billings-Jensen, Chief Executive of Age Concern New Zealand, said the findings highlight the challenges facing older New Zealanders. “Cost of living, long-term financial security, health concerns, housing, and social connection are all critical factors influencing quality of life for older people.
“It’s concerning that some older people were managing rising healthcare costs by cutting back on social activities or, more worryingly, cutting back on food and grocery expenditure.”
Self-employed feel the pinch
The challenges are particularly acute for self-employed New Zealanders, who often face a two-tier retirement system. According to a joint report by Te Ara Ahunga Ora Retirement Commission and Hnry, only 44% of self-employed Kiwis contribute to KiwiSaver, compared with 78% of employees,
and many receive no government contributions due to irregular incomes. Almost one in five reported not saving at all.
“Self-employed New Zealanders make up a growing share of our workforce, yet they are being left behind when it comes to retirement savings,” Retirement Commissioner Jane Wrightson said.
“Without meaningful reform, we risk seeing hundreds of thousands of people reach retirement without sufficient financial security. More retirees will rely heavily on government transfers, creating a future fiscal burden.”
The report recommends reforms including automatic enrolment with opt-out options, flexible contribution rates, enhanced incentives for low-income earners, and targeted financial education. Wrightson emphasised that “retirement savings must work for all New Zealanders, regardless of how they earn their income.”
