Saturday, July 20, 2024

How are GP members coping on New Zealand Super? Part 1

An on-line survey of members to assess the adequacy of NZ Super was conducted in June this year. The aim was to have data to support the Federation’s submission to the Retirement Commission for the 2022 Review of Retirement Income Policies that will be submitted to Government by the end of the year.

Just under 3000 members participated in the survey, making it the largest survey of the membership to date. The information gathered was invaluable and the Board sincerely thanks all who participated, as a significant response strongly supports our lobby efforts on your behalf.

Even though the survey was restricted to those with internet access and who were prepared to answer an on-line survey, more than 31percent of those responding were over the age of 80, and 4 percent were over 90. Our highest response group was those aged between 70 and 80 years of age, who made up just over 50 percent of those participating.

I want to sincerely thank all those who participated in this survey which has produced important data to support our lobby efforts.

David Marshall Chair Retirement Income & Taxation NAG

Living on NZ Super responses

When asked to assess how well they were coping financially at the moment, 84 percent said they were coping, coping well, or coping extremely well. In contrast 16 percent are coping poorly or just not coping.

When considering how worried members are about their financial situation in 10 years there was significantly greater pessimism with 44 percent either worried, or very worried. Members were clearly unsure if NZ Super was meeting its goal of protecting retirees from poverty, with 49 percent feeling that it didn’t achieve this goal, and 51 percent agreeing that it did achieve this goal.

Supplementing NZ Super to meet retirement expenses

With many members not coping financially currently, and more concerned about their future, it was important to evaluate just how much our members need to supplement their NZ Super to meet retirement living expenses.

Nearly 1 in 6 of our members (17.5 percent) are surviving on NZS alone and do not supplement with additional funds to pay their living expenses. 89 percent of these members struggle to pay their regular living expenses each month. Food, energy, and transport costs are the areas they struggle most with each month. All of this group have no financial reserves to draw down in the future!

55 percent of members are drawing down $10,000 or more per year to meet their retirement Living Costs, but with average KiwiSaver balances of $48,457 for women and $61,605 for men aged 61-65, withdrawals of $10,000 or more per year are not sustainable for the vast majority of retirees.

Members were asked about the “financial reserves” they have currently and 51 percent of those responding have less than $50,000 in reserves, indicating that longer term many will be unable to supplement their NZS as they age, and unless focused support is increased could face many of their final years living in poverty.

Just 19 percent have reserves of $250,000 or more to supplement NZS. It is clear that a small minority of members have reserves as outlined in the Massey University Retirement Expenditure Guidelines (Nov 2021). They recommended that two-person households needed reserves of $195,000 for a “no-frills” metro retirement, or $809,000 for a “choices” metro retirement. The required savings for single retirees was $293,000 and $600,000 respectively.

Living expenses that members struggle to pay each month

When asked, “Do you have difficulty paying your regular living expenses each month?”, just over a quarter of our members answered in the affirmative. So, what are the expenses that most are struggling with? Over 50 % mentioned energy costs, rates, dental visits, transport costs and home maintenance. As 78 percent of our responders lived in their own home it is not surprising that rates featured high in their financial challenges.

For the subset of members living in rental properties, pensioner villages, or social housing the biggest challenges were rent (76 percent), energy payments (71 percent), food & transport costs (both 67 percent).

The role of KiwiSaver for our members

Just over 40 percent of our members stated that they retired with any KiwiSaver Funds when they retired. Two-thirds of those aged 65-74 retired with KiwiSaver balances, while only 21 percent of those over 75 had KiwiSaver funds at retirement. As Kiwi-Saver only commenced in July 2007, anyone over the age of 80 today is unlikely to have retired at 65 with any KiwiSaver balance.

We were interested in learning what our retirees had done with the majority of their KiwiSaver funds since retiring. Half had invested the majority of their KiwiSaver funds for the future – including a few who are still working and investing in KiwiSaver. Some stated that their balances were relatively low when they retired and the funds were quickly used for living expenses or paying off debt. 10 percent paid off their home mortgage with the bulk of KiwiSaver, while a further 15 percent utilised most in home renovations in preparation for retirement.

In Part two of our article we will focus on Housing Issues and your recommendations on how NZ Super could be improved.

READ: How are GP members coping on New Zealand Super? Part 2

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