Harder times for older generation

Retirement Commissioner prepares to unleash battle plan as research reveals rising house prices and cost of living add up to latter years conundrum.

New Zealand is grappling with ‘‘wicked problems’’ eating away at retirement incomes, Retirement Commissioner Jane Wrightson says, as she prepares to unleash a 25-point battle plan aimed at improving life for retirees.

Against a backdrop of soaring living costs and talk of an impending recession, Tuesday’s release of the 2022 Review of Retirement Income Policies comes with a Wrightson warning: the issues are broad and will require a broad approach.

‘‘We know we are grappling with wicked problems and it’s not something that one agency can manage alone,’’ Wrightson tells the Sunday Star-Times. ‘‘It will require ongoing support and actions from many groups to help New Zealanders improve their retirement income.’’

For a year, the commission has researched a range of angles, as the number of over-65s is set to boom against a backdrop of lower home ownership, fewer reaching retirement age mortgage-free, and inflation eroding savings.

But in a low-wage economy, combined with relatively high cost of living, how can recommendations cure those ailments?

Even putting all that aside there remain issues than can be worked on, Wrightson responds.

‘‘Research on KiwiSaver balances showed people, regardless of gender and age, have lower balances than would have been expected. Some of this will be attributed to first-home withdrawals and some of it to savings suspensions,’’ she says.

KiwiSaver is a key part of the retirement income system she says, so people should at least make the minimum contribution so they can receive the government and employer contributions, and head into retirement in a better financial position.

Research highlighted gender and ethnic gaps ‘‘remain stubbornly apparent’’ so that women, Pasifika and Ma¯ ori reached retirement age with less in reserve.

‘‘Closing gender and ethnic pay gaps, and increasing levels of paid work for women by easing the unequal share of unpaid work, especially around the care responsibilities (that predominantly fall to women), are issues that we need to keep talking about.’’

Even childcare has an impact on retirement savings. ‘‘It was good to see the Government’s recent announcement which will improve the accessibility of affordable childcare,’’ Wrightson says. ‘‘We see this as a move in the right direction and would significantly benefit mothers and enable more to return to paid work.’’

KiwiSaver data shows women having on average 20% less than men. In their 40s it’s 30% less and for the 50s it’s 32% less. As well, gender pay gaps persist through a woman’s lifetime and are higher for older female workers.

Women are less able to save more for retirement in their final years of paid work, she says. While the average gender pay gap is 9.2%, at age 55-59 it is 13% and by age 60-64 it climbs to 15%.

And then there’s NZ Super, ‘‘a crucial pillar of the retirement system’’, Wrightson says.

Set up on the premise those who reached retirement age would be mortgage-free, rising house prices have more-and-more mitigated against that being the case.

Homeownership is as low as it has been since 1951, so more and more people must depend on NZ Super for daily expenses: 40% of super annuitants now have it as their only income.

‘‘When you look at what’s happening with the decline in home-ownership numbers and what the current projections are saying, you can see more pressure on this growing population,’’ Wrightson says. ‘‘By 2048, the balance of home-ownership is expected to shift to 60% homeowners and 40% paying rent, equivalent of up to 600,000 older people renting.’’

Of over-65s still paying off mortgages, 8 out of 10 are spending the equivalent of more than 40% of their super on housing costs, while of those renting, two thirds are handing more than 40% of their Super to the landlord.

Added to the ‘‘wicked problems’’ is the prospect of a tsunami of Kiwis reaching retirement age over the next decades.

The number of people aged 65-plus doubled between 1994 and 2020, to reach 842,000, Statistics New Zealand says. The number is projected to double again by 2063.

By 2028, it is expected that 19-20% of New Zealanders will be aged 65-plus, compared with 16% in 2022. By 2048, this proportion is expected to reach 21-25%.

‘‘The next generation of retirees won’t be in the same position as the current ones … many will have to work very hard to save enough money to maintain their desired standard of living in retirement,’’ Wrightson says.

Hence her saying, NZ Super is ‘‘crucial’’.

‘‘What we’re seeing more of today is a growing number of older people needing to continue working longer because they still have mortgages to pay, are renters, have been dealing with economic life shocks like divorce or business failure, and haven’t been able to save enough. They’ll also likely live longer. NZ Super provides them with a baseline income and exists to ensure an adequate standard of living.’’

It’s even more important for those with disabilities, carers, those who had irregular periods of paid work, or were low-paid throughout their working lives.

Pasifika are expected to feature in the recommendations, tied to how key home-ownership is for them, the mix of financial products they need, as well as further support for education.

Laulu Mac Leauanae, the Ministry for Pacific Peoples chief executive, said some research the recommendations incorporate could improve outcomes for Pacific matua (elders).

‘‘We know that the Western conceptualisation of retirement doesn’t resonate with Pacific matua, so with this knowledge, we can build a better system to improve the wellbeing of current and future Pacific retirees.’’

Among the issues were developing housing and land to meet the intergenerational living needs of Pacific families, and more education on homeownership, retirement, ageing and saving.

Pacific matua saw retirement as a time of continued services to family, church and community, saying they no longer ‘‘worked to earn a living, but rather worked to support their family and wider ka¯ inga’’.

‘‘The best way to live for Pacific people is to live intergenerationally. I like to live with my children and grandchildren in the future, we do not necessarily have to live in the same house, but at least we live close to each other,’’ one Kiribati matua told researchers.

Retirement does not mean the same thing to each and every retiree, but the issues facing them – and the solutions – are similar.

‘‘For many it is a time of rest and relaxation, while for others it is a time of continued service to their community. Some do not live to experience it at all,’’ Wrightson says.

‘‘Whatever retirement means to people it will still require longterm thinking and planning which is difficult for both people and governments to grapple with, particularly when they are experiencing so many short-term challenges.’’

‘‘The next generation of retirees won’t be in the same position as the current ones … many will have to work very hard to save enough money to maintain their desired standard of living in retirement.’’ Jane Wrightson

Retirement Commissioner