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Only 9% think NZ Super alone enough to live on

25 Mar 13

Only 9% think NZ Super alone enough to live on
65% say NZ Super alone not enough to live on, 9% say it is

Only 9 per cent of New Zealanders believe that NZ Superannuation alone will give them an adequate income in retirement according to Horizon Research survey results* released by the Financial Services Council.

Another 65 per cent of New Zealanders disagree, 10 per cent are unsure and 15 per cent are neutral on the question on whether New Zealand Superannuation is enough for them to retire on. New Zealand Superannuation currently provides a maximum of $349 per week for an individual and $537 per week for a couple.

The Horizon Research survey was undertaken in December 2012 with a sample size of 2219 people and a margin of error of plus or minus 2.1 per cent.

In a statement the FSC says:

“As a nation we are not planning sufficiently for our retirement and we are certainly not feeling optimistic about our ability to survive financially when we retire,” said Neilson.


“If we look closely at the profile of those people that make up the 9 per cent who feel NZ superannuation is sufficient we find that they are more likely to already be living on a low personal income that is close to the level of NZ superannuation (less than $30,000 per annum). In other words they are not a group that is representative of the majority of retired New Zealanders.”

New Zealanders have a well-founded lack of optimism about their financial position at retirement, said Neilson, and even those who believe they are prepared need to look closely at their savings plans.

“While 2 million New Zealanders have enrolled in KiwiSaver most are currently contributing at 2 per cent for the employee and 2 per cent for the employer respectively. At a 2 per cent contribution from employee/employer individuals will fall below the savings threshold that will provide them with a comfortable retirement.”

In an earlier Horizon Research survey most New Zealanders defined ‘comfortable’ as a weekly living amount that is about twice that of the NZ superannuation entitlement, or about $300 more per week for an individual and $500 more per week for a couple.

“Our calculations are that people need to save 10 per cent of their income from the time they start working to achieve a comfortable retirement," said Neilson. “That percentage increases rapidly as people delay starting to save for their retirement.”

Neilson said that even once the minimum contribution level rises to 3 per cent each for employee and employer from 1 April, there will still be a savings gap that will leave future retired New Zealanders vulnerable to an impoverished existence in their later years.

“We estimate that only about one in every ten KiwiSaver members are currently saving at a rate sufficient to fund a comfortable retirement.”

With longevity increasing and average life expectancy improving faster than has been assumed in the Treasury’s long-term fiscal projections, the savings gap is likely to have serious consequences for many New Zealanders.

“We now know that the number of years that we will live after the age of 65 is growing at twice the rate that we used to assume. Our grandparents lived for 10-20 years after they reached the age of entitlement for superannuation but the majority of today’s school leavers are expected to live for 20 to 30 years after the age of entitlement. During those 20-30 years it is highly likely that substantial costs will arise such as the need to refurbish homes or replace a car. People will not be able to make it through their retirement years solely by living frugally.”

Action is urgently needed to avoid a significant social issue in 10-20 years time, said Neilson, not only in terms of government policy, but, more importantly, on the part of individual New Zealanders.

Neilson said that all New Zealand employees need a pathway to a comfortable retirement. “One approach could be to provide a new default option for those who are not currently KiwiSaver members that allows them to enter the scheme at a 1 per cent contribution level for them and their employers but to step up the contributions by 1 per cent each year when their wages increase.”

Other KiwiSavers could have a similar option to step up their contributions as their incomes increase. What is clear, said Neilson, is that failing to address the problem should not be an option.

“People, including politicians, tend to procrastinate. We all know that we will regret not having done more in terms of our savings when we reach retirement age. But for the next generation this will not just make the difference between comfort and luxury but between poverty and comfort for an extended period in their lives. We can avoid sliding into crisis gradually if we do something about this issue now.

“There is no doubt that in my mind that New Zealand superannuation is the best first-tier age pension in the world but it needs to be supplemented with wider participation in KiwiSaver and a gradual lift in contribution rates into KiwiSaver as wages and salaries increase.”

*The Horizon Research survey was undertaken in December 2012 with a sample size of 2219 people aged 18+ and has a maximum margin of error at a 95% confidence level of +/- 2.1 per cent.

Those surveyed were asked to respond to the following statement:

“The NZ Super pension is enough for me to retire on”

Agreed or strongly agreed = 9.6 per cent
Neutral = 15 per cent
Disagreed or strongly disagreed = 65.4 per cent
Not sure = 10 per cent

Please click here for document for more information about responses in Horizon Research’s survey according to gender, age group, household income and party vote (2011).