Savings research results: NZ Super not enough

Most people understand that New Zealand Superannuation will not provide them with enough money to live comfortably.

According to results of a HorizonPoll survey conducted for the Financial Services Council, New Zealanders felt the average income needed to live comfortably in retirement was

• $632 per week for a single person living alone (NZ Super then paid $339.92 after tax), and

• $845 per week for a couple (NZ Super then paid $522.96 after tax when asked in December 2011).

The survey of 2,558 adult New Zealanders in December, 2011, finds planned or current retirement income is generally from a mix of  two to three sources, the most important being New Zealand Superannuation, KiwiSaver and savings (other than superannuation schemes).  KiwiSaver is not seen as sufficient on its own.

Men are generally more optimistic about their retirement income level than women and are generally less worried about whether their retirement savings will last to the end of their lives. 

New Zealanders are generally aware that New Zealand Superannuation may not be affordable in the future, but there is an even split over whether taxpayers would fund it if it were still available in future with an eligibility age of 65 years.  As they see the government as a key player in providing one of their retirement income sources. They are definitely interested in a review of policy and in multi-party political discussions aimed at achieving retirement income stability.

Key findings:

KiwiSaver membership:

• 50% of respondents said that they were KiwiSaver members
• Two-thirds of households surveyed have a KiwiSaver member.
• In two-thirds of the households where the respondent was a member, there was also another KiwiSaver member in the household

Perception of savings growth

• Most respondents were unable to correctly give the length of time it would take for a deposit to double its value.  More than half of respondents selected a time span less than the accurate one, suggesting general underestimation of investment growth. 
• Respondents who were aged 25-44 years tended to have the lowest expected time for a deposit to double its value.

Home ownership expectation at retirement

• 10.5% of respondents were already retired and owned a mortgage –free dwelling.
• A further 49.6% expect to do so by the time they retire.  This expectation is strongest amongst younger people.

Retirement income

• 76% of respondents believed that they were personally responsible for their income security in retirement. 31% feel that they are solely responsible for their retirement income.
• 61.2% of respondents believe that the Government is responsible for their retirement income security.
• Very few feel that their family has responsibility for their retirement income.
• 65.1% say that they find it difficult to live within their income.
• There is low belief in New Zealander Superannuation covering retirement income needs.

Expected retirement age and lifespan:

• The average expected retirement age is 67.6 years.
• The largest group of respondents – nearly 30% - expected to retire at 65 years of age
• Female respondents expected to retire earlier than male respondents; the average expected age for women is 67.1 years and for men it is 68.7 years. 
• KiwiSaver members expect to retire earlier (67.0 years of age, on average) than people who are not KiwiSaver members (68.5 years on average).
• Average expected lifespan is 83.5 years.

Weekly income requirements:

• Average needed income for an individual was $632 per week (equivalent to $38,650 per annum before tax).
• Average needed income for a couple was $845 per week (equivalent to $25,442 each per annum before tax).
• One-third of respondents feel that they would have enough retirement income to cover basic costs.
• Only 10.1% believe that a government pension like New Zealand Superannuation would be enough by itself to live comfortably.
• 62.9% of respondents said that they were not currently saving enough to retire on a comfortable income.
• Retirees who are in their own dwelling without a mortgage, or who live in a dwelling owned by a family trust are more likely to say that their income is adequate.
• 61.5% of retirees say that their income is not as much as they expected before retirement.
• Nearly 80% of respondents had some concern that their savings would run out before the end of their lives.

Income sources:

• Overall, 26.9% of respondents indicated that they would only have, or currently had, one source of income in retirement.
• New Zealand Superannuation, KiwiSaver and savings were the most important retirement income sources.
• Only 7.3% of respondents think that KiwiSaver would be their sole source of income

New Zealand Superannuation funding:

• 58.4% of respondents believed that New Zealand could not continue to afford New Zealand Superannuation if eligibility started at 65 years.
• Opinion is split on whether taxpayers would be willing to continue to pay for New Zealand Superannuation into the future if eligibility started at 65 years.
• Only 7.3% of respondents think that KiwiSaver would their sole source of income

Adequacy of retirement income:

• A majority do not think that their retirement plan will fund house refurbishment, three car replacements and overseas holidays.
• Most people are surprised at the idea that they may need to replace their car three times and refurbish their dwelling during their retirement.

The full Horizon Research report on New Zealanders’ retirement income expectations and current experiences can be downloaded here.

The results are attracting considerable media attention as the country starts debating the age at which people should start receiving NZ Super, and ways to keep NZ Super income levels while also doubling retirement incomes.

The Financial Services Council is also covering the research results at debate here and will release its future retirement policy options, on June 17, 2012.