Village Voice

Comparing Australia and New Zealand’s retirement systems.

Wednesday, June 21, 2017

Comparing Australia and New Zealand’s retirement systems.

As a New Zealander who has spent time working in Australia, I have first hand experience of both retirement systems. Of the two countries I would argue that on average Australians are a lot more likely to end up with a greater savings pot once they reach their golden years? Why? Let’s explain.

Although both retirement systems feature public pensions and private superannuation, there are a number of quite significant differences.

Firstly, the Australian retirement system is both compulsory and higher. Australia's minimum contributions rate is 9.5%, which is made by the employer and negotiated as part your remuneration package. Australian’s cannot make withdrawals or stop contributing except in exceptional circumstances. In comparison, New Zealand's KiwiSaver contribution rate is 3 per cent, made by both you and your employer. Individuals can choose to contribute at higher rates of 4 or 8 per cent but it's not compulsory. KiwiSaver also works on an opt-out model. This means employees are automatically enrolled when they are first employed, but they can choose to stop making contributions whenever they like. It is also possible in the New Zealand system to make withdrawals under certain circumstances e.g. to buy your first home.

There are also a number of differences between the two countries in regards to receiving the pension once retirement age is reached. The Australian pension is targeted at those with greater needs where as in New Zealander everyone receives the same amount.  In Australia you are means tested, meaning the pensioner's income and assets are taken into consideration when deciding whether and how much they are entitled to.

Both systems have their merits. In Australia you are likely to end up with more and pension payments are skewed towards those who need it most. However the New Zealand’s system is simpler and offers a greater level of flexibility throughout ones working life. Having been part of both systems and seeing how quickly my savings grew while residing in Australia, I personally believe the Australian system is more likely to ensure one is financially stable during retirement years. Ensuring we have the best system in place is extremely important as we move in to an age where a greater portion of the population will no longer be working and we have less tax paying citizens to support them.


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