New Zealand will reach a new milestone in 2028, when the Government makes its first-ever withdrawal from the New Zealand Superannuation Fund. The move, announced by Finance Minister Nicola Willis, marks a shift in how the country plans to manage the growing cost of retirement as the population ages.
A First for the Fund
Set up in 2001, the NZ Super Fund was designed to help pre-fund future pension costs and ease the pressure on taxpayers. Since its creation, the Fund has only received contributions, growing to a value of $80 billion. The 2028 withdrawal will be the first time money is taken out.
Willis made the announcement during a pre-Budget speech and noted that the timing is based on rules set out in the Fund’s governing legislation, not on a discretionary government decision. “The date of the withdrawal is not at the Government’s discretion.”
Timeline Moves Forward
The Treasury had previously forecast the first withdrawal to take place in 2033, but that timeline has been brought forward due to changes in economic conditions. The first withdrawal will be relatively small—$32 million in 2028. Willis said this would be followed by a few years of “bouncing around between withdrawals and contributions,” with consistent annual withdrawals expected from 2031 onwards.
These earlier withdrawals reflect updated assumptions about superannuation costs and demographic changes that are putting more pressure on the country’s finances.
Fund Still Expected to Grow
Despite the upcoming withdrawals, the Fund is expected to continue growing in the short term. “On reasonable assumptions, Super Fund returns will outstrip withdrawals, and the Fund will continue to get bigger every year,” Willis said.
Withdrawals will help reduce the cost of superannuation that taxpayers would otherwise have to cover. Still, the Fund is only expected to contribute about 20% of the total superannuation cost in the years ahead, with the remaining amount still funded by the government. The annual cost of superannuation is projected to reach around $29 billion.
Additional Investment in Startups
Willis also announced a new $100 million investment in the Elevate fund, which supports startup businesses. Of this amount, $61 million will come from the 2025 Super Fund contribution, with the remaining $39 million coming from the Government’s capital budget.
Launched in 2020, Elevate operates by investing in venture capital funds that in turn back high-growth startups. The fund has so far committed $221 million and attracted $536 million in private investment. Companies like Dawn Aerospace and Halter have benefited from this funding model.
Broader Retirement Strategy Underway
The decision to begin Super Fund withdrawals is part of a wider conversation about how New Zealand funds retirement. Willis has signalled that changes to KiwiSaver may also be on the way, including possible reforms to the $521 annual government contribution. These could have implications for how New Zealanders plan for retirement and how the government balances support across different income levels.
What Comes Next
The upcoming Budget is expected to provide more details on these potential reforms. As the Government starts using the Super Fund to help cover pension costs, it raises questions about long-term sustainability and how future generations will be affected.
While the Fund is still growing, and the first withdrawal is relatively modest, this development represents a shift in approach. It suggests the Government is beginning to rely more on pre-funded resources to manage the rising cost of superannuation.