There is no shortage of opinion pieces or expert commentary making the case that Kiwis are financially illiterate. Apparently we’re not good with savings, we don’t plan for the future, and we do not take even simple actions (like switching out of our default KiwiSaver funds) to optimise our future financial security.

But are individuals wholly to blame?

The message that individuals will need to take greater personal responsibility for the retirement savings is not a breaking news story. Raising the nation’s financial literacy has been seen by policymakers as a priority for ensuring the country is prepared for the fiscal challenges that lie ahead.

It is my generation who are told that the future costs of New Zealand Superannuation (NZS) are unsustainable. We are told that NZS will not be available, or will not be available in its current form, by the time we retire. Change is inevitable.

If that is the case, then what is stopping individuals and government from making those necessary changes? If suffering elderly poverty or being in dire fiscal straits is not a great enough incentive to act, what is?

It is my contention that both individuals and government lack the incentives to take greater responsibility for their future financial security. And this problem has no easy solutions.

A highly financially literate person might not save a great deal for retirement if they have every reason to believe that NZS or some other form of welfare safety net will be available to them. Such a person would simply be rationally responding to incentives.

People might also not be engaged with their KiwiSaver accounts if they believe the government’s default settings will already reflect their best interests. Worse, those with KiwiSaver might become complacent that their future retirement is already being taken care of, without checking in on what lifestyle their future KiwiSaver yield is likely to afford.

And as for the Kiwi obsession with housing investment, well, that is hardly grounded in financial illiteracy. The tax system’s favourability towards housing compared to other investments, combined with the government-regulated constraint on housing supply, makes housing investment a rather financially literate option.

I wouldn’t be the first to observe that messages and incentives matter. In Interest.co.nz’s own analysis of how much individuals will need to save for their retirement, it includes the caveat “You need to focus on what you need to do. Try to avoid thinking about the fact that the public purse will be available for those who either can't or can't be bothered.” In other words, personal responsibility requires ignoring current public policy settings and incentives structures.

But the reason for such mental gymnastics, which the same article acknowledges, is sound: we must protect ourselves from changing public policy positions.

Let’s leave aside the specifics for now on exactly what needs to be done. While there is some contention about what policy changes are needed and when they should take place, there is much less contention that the future fiscal costs of healthcare and NZS will put pressure on the public purse.

And if governments continue historic spending patterns, Treasury projections suggest debt financing costs could soar from 1.6% of GDP in 2015 to 11% of GDP in 2060. That proportion is greater than the possible future costs of NZS (7.9% of GDP in 2060) and healthcare (9.7% of GDP in 2060).

Maintaining an economy of good productivity growth and stable debt levels will protect the financial security of New Zealanders under a range of possible future circumstances.

The problem then is not that NZS is “unaffordable.” In fact, NZS changes to NZS are not “inevitable.” It is a matter of opportunity costs.

If voters demand universal NZS as it exists today, and governments are so inclined, they will find a way to finance it. This can mean cutting spending in other areas, raising taxes, or taking on more debt. Change will only be “inevitable” if voters demand it or the country’s debt spiral leaves few other options.

Governments, after all, want to get re-elected. Governments also face less incentives to get decisions right, especially when the outcomes will not manifest themselves until well after their reigning term.

When New Zealand has one of the lowest elderly poverty rates in the world, and a low rate domestically (the material deprivation rate for older New Zealanders is 3%, compared with 11% for the total population), is it any wonder why retirement savings and superannuation reform do not make it to the top of the government’s priority list?

It appears we’re stuck in a bit of a bind.

Individuals lack the incentive to take greater personal responsibility for the retirement savings because of the welfare safety net that exists. They also lack an incentive to actively vote away their future entitlements.

Meanwhile, governments lack the incentive to retract NZS entitlements because of the political imperative. And even if changes were made, there is no guarantee that incoming governments will not offer greater and greater benefits to secure their electoral success.

Yet it will be individuals who suffer, and particularly younger generations, from government inaction. Even if future generations received the same NZS entitlements that exist today, they will not be protected from economic shocks.

NZS is vulnerable to the economic conditions of the day. The fact that a significant part of the population are wholly reliant on NZS as their source of income, is not a sign of a financially secure population.

Individuals also benefit from having a long lead-in time, so that they can adjust their savings regimes accordingly. If governments wait until NZS is truly unaffordable, economic reform will have to be sweeping and it will be painful.

So who are the real financial illiterates? After all, governments are not (always) good with savings, don’t plan for the future, and sometimes do not take even simple actions to optimise future financial security.

Rather than focusing on the flaws of individuals, governments might do better to explore their own behavioural biases.