Photo: New Zealand Railways Corporation.
Should we lower the superannuation eligibility age for Māori?
Wed 27 Apr 2022 by Nick Brunsdon in NewsletterMāori

Māori Party co-leader Rawiri Waititi recently called for the eligibility age for New Zealand Superannuation (NZ Super) to be lowered to 57 years of age for Māori. Waititi made the argument based on Māori having a lower life expectancy than non-Māori. Life expectancy only tells part of the story, so in this article we explore the issue by looking at life expectancy, health expectancy, and the nature of work. We find some stark differences between Māori and non-Māori, but ultimately changing Super eligibility won’t change health and life expectancy outcomes.

NZ Super eligibility age hasn’t kept up with life expectancy

Changes to the age of eligibility of NZ Super have been made on an adhoc basis over the years, largely due to extreme political sensitivity. The age of eligibility for universal superannuation was set at 60 in 1977, and progressively raised to 65 between 1992 and 2001.

We can see the relationship between eligibility and life expectancy with ‘Super years’ – the number of years that a person can expect to receive NZ Super for. This data is based on the age of eligibility when they first become eligible (i.e. when someone turns 60 or 65) and their life expectancy at birth. Chart 1 shows that the increase in NZ Super eligibility to 65 by 2001 effectively reset super years back to 1970s levels for women. Women born in 1917 would 13have become first eligible for NZ Super in 1977 and received NZ Super for 11 years on average, given their life expectancy of 71 years. As life expectancy increased, Super years increased too, until the age of Super eligibility started rising in the 1990s and pushing Super years down. By 2001, Super expectancy for women was back to 11 years.

Super years have increased since 2001 as life expectancy has continued growing while Super eligibility stood still. In 2020, Super years reached 13 years for males and 17 years for females.

Lower life expectancy for Māori

It is well established that Māori face shorter life expectancy than non-Māori. Chart 2 highlights that for the cohort born in 2016, Māori males are expected the live for 75 years, 6 years fewer than non-Māori males. Māori females are expected the live for 78 years, 7 years fewer than non-Māori females.

The disparity in life expectancy between Māori and non-Māori has been closing over the past 20 years, with the disparity for males dropping slightly from 9 in 1996 to 8 in 2018, and females from 9 to 7, according to Stats NZ estimates.

The effect of this disparity in life expectancy is that non-Māori will collect NZ Super for longer than Māori. For those born in 2016, assuming the age of eligibility remains at 65, a Māori female could receive NZ Super for 13 years on average, compared to 20 years for non-Māori female.

Health expectancy is important

Life expectancy paints part of the picture of retirement – it tells us how many years people can expect to receive NZ Super for, on average. However, it’s important to think about what those years will look like as NZ Super is often framed as safety net for those who are no longer physically able to work.

The field of epidemiology uses the concept of health expectancy, the average number of years spent in good health and free from functional limitations. In particular, this field is interested in the difference between life expectancy and health expectancy, to see whether increases in life expectancy are translating to a longer healthy life, or merely an extended period of poor health at the end of our lives. We can also consider what this means for the labour force, as most people would struggle to continue working past the end of their healthy life and are therefore likely to need the safety net of NZ Super.

Health expectancy disparities are sobering

Ministry of Health analysis of health expectancy makes for some sobering reading, highlighting that even Māori born in recent years will on average reach the end of their health expectancy before becoming eligible for NZ Super.

Māori males born in 2016 have a health expectancy of 64 years, meaning that they are likely to face significant health limitations before becoming eligible for NZ Super at age 65. The gap between health expectancy and Super eligibility is likely to be greater for older cohorts. Non-Māori males born in 2016 have a health expectancy of 71 years, meaning they can expect 7 more years of good health than Māori.

Māori over-represented in lower-skill level occupations

Beyond disparities in health and life expectancy, Māori are also over-represented in lower-skill level occupations. Labouring occupations account for 18% of all Māori employment in 2021, compared to 11% for non-Māori. At the other end of the skill spectrum, professional roles account for 18% of Māori employment compared to 25% of total employment. These differences mean that Māori are over-represented in jobs that are more physical in nature, and coupled with poorer health expectancy, are more likely to need support earlier.

More discussion needed on options to address the gaps

It’s clear that greater policy advice is needed on addressing the gaps identified between Māori and non-Māori. Prior to 1977, New Zealand provided a two-tiered national superannuation scheme, with means-tested superannuation available from 60 years of age, and universal superannuation from 65 years of age.

It’d be worth revisiting and evaluating how a more limited payment (akin to the Support Living Payment) could work to support the needs of Māori and non-Māori who have been working in physically demanding roles or otherwise face health limitations before they are eligible for universal superannuation. Exploring this option may leave fiscal headroom for investment in closing the life and health expectancy disparity, especially if taken in conjunction with a rise in the age of universal superannuation eligibility to match increases in overall life expectancy.

A political decision

The differences in health and life expectancy between Māori and non-Māori are stark and sobering. Māori are likely to receive Super for a shorter period than non-Māori due to their shorter life expectancy. Māori are also more likely than non-Māori to face health limitations that limit their involvement in the workforce before they become eligible for NZ Super. The over-representation of Māori in lower-skill level occupations mean that they will likely find it harder to remain working until the age of Super eligibility.

Ultimately, deciding to lower the NZ Super eligibility age for non-Māori would be a political decision – one that would need to be made based on need and the opportunity cost of limited government funding. Such stark differences in life and health expectancy deserve attention but bringing down the eligibility age of universal superannuation doesn’t fix the issue, and will limit our ability to invest in other areas, such as in improving healthcare and health outcomes for Māori.

Importantly, such a move would also make superannuation not “universal”, with different eligibility for different groups. With a range of other cohorts often discussed in the NZ Super debate (physical workers, men vs women, wealthy vs not-wealthy recipients), a shift away from a universal Super system would need a fundamental rethink of the scheme, rather than just small tinkering. More discussions are needed on the changes needed to make NZ Super fit for purpose. Addressing disparities are critical, although a universal cash payment system is unlikely to be the best policy solution to ingrained health and educational differences.

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