In brief

• MPs will be receiving pay increases of up to 10%, with salaries reaching over $181,000 by the end of their terms.
• The Remuneration Authority determines MPs’ salaries but terms of reference are set by politicians.
• MPs’ pensions are worth more than  20% of their salary.
• There are also  tax-free allowances  intended to cover legitimate costs but no receipts needed so there is room to profit.

Overview of MP remuneration

Following a six-year salary freeze, all NZ members of parliament and elected representatives on local government have just received pay rises of as much as 10% on their base salary.

By the end of their terms, MPs will be earning, in salary alone, just over $181,000. This is up from about $164,000 currently. Cabinet ministers will earn just over $304,000. The Prime Minister’s annual salary will increase from $471,000 to $520,500 by 2026. PM Christopher Luxon has noted he will donate the increase to charity. 

For context, the average full time worker in New Zealand earns about $82,500 per year.

All MPs are entitled to “basic allowances,” which are tax-free and meant to cover various out-of-pocket expenses. These allowances account for costs related to entertainment for visitors, staff, constituents, and officials, as well as for koha (gifts or donations in Māori culture), meals, and similar expenses. The numbers aren’t extravagant, in comparison to real world costs they are intended to cover, but there is room to profit tax free when no receipts are required.

Pension schemes

Most significant of the non salary compensation is the pension. MPs are entitled to collect a pension when they reach the age of 50, provided they have served for at least six years. They get a pension of $2.50 for every $1 contributed, as well as KiwiSaver.

According to political commentator Bryce Edwards, this amounts to an extra $33,000 per year courtesy of the taxpayer. However, this will increase to roughly $36,000 when MPs’ higher salaries are realised in 2026. 

The pension starts at age 50, provided they have served at least 6 years. Sitting members may not receive parliamentary pension payments. 

Accommodation

One of the expenses that the politicians are entitled to be reimbursed for, but in some cases with no receipts required, is the accommodation support for time spent in Wellington. The allowance is based on market rentals in central Wellington, with some additional costs covered, up to $36,400 per year for an ordinary MP.  All the while you could live with a relative, for instance.

How is politicians’ pay determined? 

The Remuneration Authority is responsible for determining the salaries and allowances of members of Parliament. Their latest report can be found here. It is supposed to be independent, but the terms of reference for this review were set by politicians themselves, instructing the Authority to consider MPs’ pay comparable to corporate executives. Also, the instructions were the amount could not be reduced.

According to political commentator Bryce Edwards:

“Overall, real incomes are going backwards at the moment. Therefore, it’s rather ludicrous for politicians to essentially vote themselves a pay increase on their already generous incomes, albeit through the trick of the not-really-independent Remuneration Authority.”

There is another perspective that these people are running the country, that is much more important than the average job and so worth much more pay.