Meet Jim. Jim first started paying taxes when he was 12 years old and picked up a lawn mowing job. Jim has paid taxes throughout his working life, with the expectation that some of those taxes would go toward his pension. Jim sees NZ Super as an entitlement to what has always been rightfully his.

Then there is Susie. Susie is tired. She is 62 and works in a manual job. Her body is tired and struggling but she does not have the skills to change industries or the income to retire early. She shudders at the thought of the government raising the pension age when she is fighting to work till she reaches 65.

Last week, The New Zealand Initiative released its report on the future of superannuation Embracing a Super Model: The superannuation sky is not falling. And believe me, we encountered a lot of Jims and Susies responding to the report, and such views are not uncommon. Both beliefs challenge the universalism of the NZ Super model.

As well as considering what aspects of the NZ Super model might need to change, Embracing a Super model equally considers aspects that should not change.

1 New Zealand’s pension system one of a kind

New Zealand is one of only a handful of countries in the world to have a universal non-means-tested pension, payable from the age of 65 until death. As an international outlier, one might assume that being out of step is a bad thing.

Yet NZ Super is also relatively affordable compared with many OECD countries, both today and in 2050. At about 8% of GDP, the projected public expenditure on NZ Super is still lower than what many OECD countries are paying currently.

Something about the model is clearly working. Poverty rates for the elderly are low. The material hardship rate for superannuitants is 3%, compared with 11% for the whole population. Internationally, New Zealand’s material hardship rate ranks as one of the lowest compared with countries in the European Union.

The simplicity and efficiency of the NZ Super system need to be appreciated, too. Means-tested systems have the disadvantage of distorting incentives to save or continue working. They can incentivise prodigality and leave people worse off as they have no other form of income or financial cushioning. Because NZ Super is universal, the decisions are not distorted as much.

To preserve the best parts of the NZ Super system, the concerns of Jim and Susie need to be addressed.

2 NZ Super is not a private pension fund

I am sorry to break it to Jim but those who believe they paid their taxes into some kind of guaranteed pension fund so that they can receive NZ Super are sorely mistaken.

NZ Super is not some kind of contributory savings scheme where payments are based on input. Nor is there anything that guarantees NZ Super will always be here unchanged – not even the Super Fund secures the model’s future. The most the Super Fund will do is partially smooth the costs.

Those who want to see a financial reward for their hard work and effort ought to welcome any changes to the NZ Super model that would lower the costs. The alternative is to pay higher taxes toward a system that does not recognise contribution and might not even be there in its current form by the time the taxpayer retires.

3 A universal system cannot cater for all individual differences

Our universal system does not discriminate based on the taxes paid or public services and welfare benefits received throughout one’s working life.

The trade-off is that such a system also cannot cater for all individual differences. People work in different jobs, they age at different rates, and they require different levels of support.

Much of the resistance to raising the pension age has been based on the observation that some groups may be disadvantaged. But the pension age is arbitrary. No matter what age eligibility is set, there will always be some people who struggle to meet it.

It should be recognised that the universal pension is only one part of the welfare system. Those who cannot work should be supported, and health inequalities should be addressed through the health system. Keeping NZ Super costs low frees up money for those most in need.

4 Make small tweaks now to avoid bigger changes later

Small tweaks to NZ Super can preserve the universalism of the model, while targeting public spending to where it can be most effective.

The Jims of this world have worked hard and deserve to enjoy the fruits of their lifelong labour, and are entitled to support when times get tough. And the Susies of this world deserve additional support through the welfare system when they are incapable of work. They should not have to wait until they reach the magic pension age to experience greater wellbeing.