Retirement is much tougher if you don’t own your house.


NZ Super might need to be reviewed as more New Zealanders approach retirement without their own homes, commentators say.
University of Otago research shows non-homeowners are in a worse position at retirement, and recommends action before the problem grows.
“We’re staring down the barrel of future generations of non-homeowners being less able to achieve acceptable standards of living when they retire because of the critical factor of home ownership,” said Helen Roberts, of the university’s accountancy department.
The research team of PhD student Jelita Noviarini and supervisors Andrew Coleman, Roberts and Ros Whiting said the results showed a need for the New Zealand government to address the lack of suitable public housing, rising housing and rental prices, and mandate compulsory contributory retirement savings plans.

New Zealand Superannuation is based on the assumption that recipients are homeowners. It’s clear through statistics and the current attention on housing affordability that this is becoming less of a reality for many New Zealanders. The longer policy makers take to address this issue, the worse it will be for many New Zealanders,” Noviarini said.

Financial adviser Liz Koh said NZ Super needed a thorough review to see whether it was doing the job it was meant to – “which is to provide a basic standard of living for all retirees”.
She said where people were in New Zealand also made a big difference to how well they could live on the pension.
“We know that for people who live in urban areas the cost of living is higher and there is a bigger gap between the pension and living expenses. I have always thought too that the inflation index for retirees is different than for people who are still working and that possibly the rate of increase in the pension is not high enough.”
Coleman said the research showed that selling up and living with family was the best retirement option.
“[But] outcome is less achievable as families become more individualistic and less communitarian. Single females are exposed to large drops in adequacy if they choose or are forced to sell and rent,”

There are still lots of gaps in our understanding of KiwiSaver.
The study also found that Māori, renters and individuals living in multi-dwelling occupancies have much lower levels of financial adequacy. Individuals of Pākehā or Asian ethnicity, homeowners and those living alone benefited more from imputed rent derived through home ownership.
Economist Gareth Kiernan, of Infometrics, said owning a house and paying off the mortgage was a type of forced saving.
“If people have paid off their mortgage by the time they have reached retirement age, then their living costs are significantly lower than people who are renting, or, in a small proportion of cases, still paying off their mortgage.
“Older people who are renting or making mortgage payments would potentially be eligible for the accommodation supplement, although this additional payment would almost certainly only cover part of their accommodation costs. So they would still be worse off than someone who owns their home outright.”
He said KiwiSaver was one way the government had tried to improve retirement savings rates.
“Arguably, however, the people who most need to save more for retirement are the ones least able to do so. So KiwiSaver probably doesn’t address most of the issues presented by a society where wealth appears to be becoming less evenly distributed.”
He said making KiwiSaver compulsory would not reduce living cost issues for everyone, while making the pension more targeted based on people’s wealth created a a disincentive for people to save for their retirement.
“Convincing people to look 30 years into the future and plan for it now is hard enough at the best of times. Pairing the two changes together – noting that the targeting would probably need to be phased in over time – could help make superannuation more effective, but would be difficult to implement politically given a lot of people have the attitude that they’ve paid their taxes throughout their working life and deserve to get some of that back in retirement.”
Government might need also to consider the role it played with social housing for elderly people, he said.

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