Pension Guide — Retirement Income Options and Tax in New Zealand
the pension and retirement income options in New Zealand. The guide covers NZ Super (the government pension), KiwiSaver lump sum withdrawal and the regular drawdown, the annuity products, and the tax treatment of the retirement income streams.
NZ Super, KiwiSaver, and Annuities
New Zealand provides the NZ Superannuation as the universal government pension from the age 65. The KiwiSaver savings may be withdrawn at the age of 65 as the lump sum or the regular drawdown. The annuity products are available from the life insurance companies — the annuities provide the guaranteed regular income in exchange for the lump sum premium. The return of the capital portion of the annuity payments is not taxable, while the interest component is assessable. The KiwiSaver lump sum withdrawal is tax-free. See our NZ Super Guide → and the Retirement Planning Guide → for the comprehensive rules.
Retirement Income Tax Planning
The retirement income streams are taxed differently: (a) NZ Super is taxed through PAYE at the marginal rate, (b) KiwiSaver drawdown is tax-free, (c) the annuity interest portion is taxed at the marginal rate, (d) the PIE investment income is taxed at the maximum 28%, and (e) the NZ dividends continue to carry the imputation credits. The retirees in the lower tax brackets may benefit from the 10.5% RWT rate on the interest income and the PIR reduction. The tax planning includes the income splitting with the spouse and the timing of the investment sales. See our NZ Tax Calculator → for the retirement income estimates.