Nicola Willis’ May 28 Budget staked out an increasingly steep curve for the Government’s contributions to the NZ Super Fund. Photo / Mark Mitchell
The Super Fund is New Zealand’s largest taxpayer, now paying far more in tax than the Crown stumps up each year to help build the country’s retirement nest egg.
The fund’s latest full-year income tax return shows it paid $1.7 billion in the 12 months to June 30, 2025. Already, the fund has paid provisional tax of $960 million in the year to date. This compares with the $994 million ANZ New Zealand paid in the year to September 30, 2025.
There’s more to come.
Treasury figures show that the fund is projected to pay $100b in domestic tax between now and when withdrawals from the fund are projected to commence in 2054, according the Super Fund’s Head of Tax, John Payne.
Designed as a buffer for tomorrow’s retirees, the fund is increasingly helping to underwrite today’s government budgets. It is now at a point of maturity where the tax it is paying significantly exceeds the Government’s contributions to the fund, and is an important part of the picture when talking about the value it provides to New Zealand.
Nicola Willis’ May 28 Budget also staked out an increasingly steep curve for the Government’s contributions to the fund. But even though annual projections reach $1.049b in 2030, they are still way below the fund’s forecast income tax payments.
Under the Budget forecasts, the first withdrawals from the fund have been delayed to 2054. That means the first small withdrawal of $32m in 2028 won’t take place.
The upshot is current taxpayers will have to continue to foot the full bill for today’s NZ Superannuation payments for another 25 years.
And while the boomer generation bubble will largely have passed through, Generation X and their successors would be advised to build up their KiwiSaver accounts in the meantime.
Clearly, the fund would grow much faster and be able to provide a buffer for future super payments earlier if it were not taxed.
But Treasury likes the taxable model for flexibility. The contributions and withdrawals profile will continue to change – for example, if the fund exceeds return expectations, the required Government contributions will be lower than currently projected. Changes to the generosity of the current NZ Super (aka National Super) policy, population demographics, and GDP would all influence the model.
Latest figures show the fund’s net asset value was $94b at May 31, 2026 (on an unaudited basis). This is an increase of $3b over the $91b recorded at April 30, 2026. The increase was primarily driven by world stock markets with the S&P 500, for instance, up 5.1 % for May 2026.
The fund’s value is on track to double every decade or so.
The Government - aka “the Crown” - has the flexibility to spend domestic tax paid by the fund on whatever it wants – that is its prerogative and was always the intent. But withdrawals must be used for superannuation. As mentioned previously, those withdrawals won’t now take place until 2054.
Treasury models the fund’s returns at roughly 7%–7.5% and, assuming about 24% of that is paid in tax into the consolidated fund, the result is a structure that gives Cabinet ministers maximum flexibility, effectively helping to pay today’s pensions even before any formal drawdowns begin but it does raise questions over the erosion of the very nest egg that is meant to protect future generations.
Latest figures show the fund’s net asset value was $94b at May 31, 2026 (on an unaudited basis). This is an increase of $3b over the $91b recorded at April 30, 2026. The increase was primarily driven by world stock markets with the S&P 500, for instance, up 5.1 % for May 2026. The fund’s value is on track to double every decade of so.
The NZ Super Fund is already seeding the next wave of green infrastructure.
Alongside Copenhagen Infrastructure Partners – the Danish specialist aggressively transforming the North Sea into a global green energy hub – it is backing a proposed offshore wind project off the South Taranaki Bight that could deliver around 10% of New Zealand’s current electricity demand.
In March 2022, the fund established the Taranaki Offshore Partnership.
With a capital cost in the order of $5b–$6b, the scheme would materially ease dry-year risk and reduce reliance on fossil back-up at Huntly, however, it has become hostage to slow-moving legislation and a tangle of seabed and Māori interests rather than any shortage of capital.
Sound familiar?
In fact, it is reminiscent of the political paralysis that scuppered the fund’s earlier proposal for an Auckland light rail project that never got off the ground.
Well before the current offshore wind push, the NZ Super Fund had tried to import the Quebec model of pension fund-led infrastructure to Auckland. The Guardians of the Super Fund formed a joint venture with CDPQ Infra, called NZ Infra, to bid on light rail development in Auckland.
La Caisse de depot et placement du Quebec (CDPQ) has a mandate to support economic development and pension fund-led infrastructure.
Under former CEO Adrian Orr and his successor, Matt Whineray, the fund proposed the partnership would finance, build and operate light rail on a long-term concession, much as La Caisse does in Montreal. The concept – effectively letting a sovereign fund and its Quebec cousin take on project risk in exchange for decades of steady returns – never made it past Cabinet.
A pattern has emerged: the Super Fund is ready to co-invest billions alongside some of the world’s most sophisticated infrastructure players, but Wellington’s political and regulatory caution keeps turning potential strategic assets into stranded opportunities.
Treasury models NZ Super Fund contributions, withdrawals and tax payments over a 40-year time frame, refreshed every six months.
As the fund’s Payne explained to the Herald, two of the key inputs into the model are NZ Superannuation expenditure and GDP. Estimates of what NZ Super will cost are driven by projections of population demographics, CPI and average ordinary time wage growth. Long-term GDP projections are also influenced by population projections.
“The size of the fund over time is also a key input into the model and the resulting contribution/withdrawal track,” said Payne. “The key drivers of this are the starting point level - in effect, past performance and contributions - and the fund’s expected before-tax annual rate of return, recently revised down to 7.2%.
“They work backwards so that, on paper, the fund is exhausted at year 40 – but because the exercise is re-run every Budget, the fund effectively continues for decades, peaking then declining as a percentage of GDP, but continuing in perpetuity.”
The Super Fund is ready to co-invest billions alongside some of the world’s most sophisticated infrastructure players, but Wellington’s political and regulatory caution keeps turning potential strategic assets into stranded opportunities.
Treasury estimates tax paid at 24%. “This is the domestic tax we pay on our returns,” adds Payne. “If the fund has a strong year, it will pay more tax – if it records a negative return, it may not pay any tax. The model takes a long-term view and we feel the 24% is a reasonable proxy.”
The corporate tax rate is 28%, with non-equity investments generally taxed at this rate. The fund pays tax on New Zealand and listed Australian dividends it receives, less a credit for any imputation credits or foreign tax withheld. Capital gains are excluded (and no deduction when markets fall).
For all other equity investments, it pays tax under the FIF regime using the FDR method : on a deemed 5% return on global listed equity value, taxed, while actual dividends received and capital gains are excluded (and no deductions made when markets fall).
The second part of Fran O’Sullivan’s NZ Super Fund report will run in Saturday’s Weekend Herald.