Goal 1 of the Positive Ageing Strategy

Along with health and housing, income is key to the wellbeing of New Zealand’s older people.

Details below about this goal are taken from the 2014 report on the Positive Ageing Strategy, published in April 2015.  Your feedback will help inform the next comprehensive update due to be carried out in 2017.

More information and references are available by downloading a full copy of the report.

Income: key achievements

• Providing NZS to all people aged 65-plus
• Maintaining older people’s incomes and living standards
• Providing extra help for those most in need

What’s happening?

Spending on NZS is increasing

The Government has committed to maintaining NZS for all people age 65-plus who meet the eligibility criteria. In the 2013/2014 year, 612,466 people received NZS and the total expenditure on NZS was $10.2 billion. This is forecast to increase by 33 percent to $13.6 billion in 2017/2018.

While older people generally have low hardship rates…

The combination of NZS and a high rate of mortgage-free home ownership among those aged 65-plus has led to a low 3 percent hardship rate. Only 9 percent are on low incomes (after housing costs), compared with 16 percent for the population overall.

… those on fixed incomes are at risk.

Around 40 percent of people aged 65-plus rely solely on NZS for income. This is likely an issue for those living in larger cities, but also in smaller areas such as New Plymouth, where the costs of living (eg, for transport, insurance, housing and rates) mean they may not have enough money to cover unexpected events and emergencies.

Rising council rates may affect older people’s disposable incomes

Councils in areas facing declining populations (and therefore fewer ratepayers) are becoming concerned about likely rates’ increases. These could reduce significantly the disposable incomes of older people, especially those who rely solely on NZS.

Those approaching an older age are likely to be more at risk of hardship

Hardship in older age is projected to be more likely for those currently aged 45–64, especially those who:

• don’t own homes or are still paying mortgages
• are on low incomes or not enrolled in KiwiSaver

These people are likely to face high ongoing costs in retirement, particularly if NZS is their sole source of income.

Options are needed for KiwiSaver pay-outs

When KiwiSaver members turn 65 they currently can access the full balance of their accounts as a lump sum and there are few opportunities to turn some or all of that money into regular income payments to supplement their NZS. Some providers give members access to draw down capital on a regular basis, however as balances grow more options will be needed to assist with decumulation.

Longer lifespans will require more savings and better financial capability

The longer that people live, the more money they need to fund their retirement – and the more, and the earlier, they need to save. The Commission for Financial Capability believes we need to boost people’s financial capability, especially given that:

• more and more people are enrolling in KiwiSaver, and therefore increasing their chances of a good income in retirement
• governments and businesses around the world are transferring the risks and responsibilities of funding retirement income to individuals – making them more responsible for their own financial futures.

Māori cite income differences from non-Māori

In a study by the University of Auckland, Māori participants (aged 80–90) felt less comfortable than non-Māori with their incomes. However, benefits such as the SuperGold Card were seen as “related to a higher quality of life”.

Examples of services, programmes and research

Department of Internal Affairs – Rates Rebate Scheme

The Rates Rebate Scheme provides a rates subsidy for low-income home owners. Many older people who rely solely on NZS qualify for the subsidy, as the income threshold is $24,250 per annum.

OSC – Enduring Power of Attorney information campaign

This campaign encourages New Zealanders to get Enduring Powers of Attorney (EPAs) so that they:

• have certainty for themselves and their families should they lose the ability to make their own decisions
• are protected from potential financial abuse

The campaign was developed after a review of the general public’s awareness and understanding of EPAs, which revealed confusion and misinformation, and in response to research indicating that only 17 percent of people have EPAs.

Commission for Financial Capability

The Commission is focusing its work to help New Zealanders of all ages, but particularly those over the age of 50. Its focus includes helping the public to be better prepared to plan for the transition from paid work, to using investment income, such as KiwiSaver, as a way to support their retirement years. The specific focus is on educating people aged 50-plus to be more financially capable – and in turn save for, and manage income in, their retirement years more effectively.

Veterans Affairs New Zealand and Ministry of Social Development (MSD) – Veteran’s Pension

The Veteran’s Pension is a fortnightly payment for veterans aged 65-plus who’ve served in wars or other emergencies. Veterans who qualify have the choice of the Veteran’s Pension or NZS. Changes introduced in December 2014 mean that more people will be entitled to Veteran’s Pensions and a new compensation payment will be available for veterans under 65 with a disability related to war service.

MSD – Disability Allowance

The Disability Allowance provides financial assistance to people with regular, ongoing medical costs such as for doctor and hospital visits, medicines, extra clothing and travel. At the end of April 2015, 130,000 older people were receiving the Allowance, at an average $24.51 a week.

Research – New Zealand Longitudinal Study of Ageing

This project interviewed thousands of people aged 50–84 with the aim of identifying the health, wealth and social factors that underpin successful ageing in New Zealand. Most participants (especially younger workers and those in poor health) were pessimistic about their likely financial status in retirement – especially women, Māori and those with low job satisfaction and negative perceptions of their rewards at work.

So how are we doing?

Overall, older people in New Zealand are currently in a relatively comfortable situation. This is largely owing to the combination of NZS and high rates of home ownership, which has led to low levels of hardship.

However, people approaching retirement in the future (notably some groups aged 45–64) may be at risk of greater hardship because of:

• lowering home ownership rates
• high current hardship levels, which may continue into retirement

In addition, other income-related issues such as rising council rates and insurance costs are beginning to emerge. These could affect all older people who live on fixed incomes such as NZS.

What do you think?

1. How do we encourage better financial capability and more retirement savings, especially among those aged 45–64?
2. What options do people receiving KiwiSaver at 65 have to invest and manage their money wisely?
3. How can we ensure that people aged 45–64 who are at risk of hardship are financially okay when full-time paid work is no longer feasible?

If you would like to share with us your views on Goal 2, then please send us an email.