The Retirement Income Gap

Sunday, June 9th, 2019


The latest Retirement Expenditure Guidelines report published by Massey University paints a sobering picture. Using data from the Department of Statistics, the report looks at spending in retiree households and found that of the households considered, all are spending more than NZ Superannuation. How much more depends on where you live and how frugal or extravagant your lifestyle is. A two-person household living in a provincial area on a no-frills budget is likely to spend around $14 a week more than NZ Superannuation. On the other hand, city dwellers with a more comfortable lifestyle spend around $800 a week more.

Around 20% of people over the age of 65 still have a mortgage and around 25% don’t own a home. The pension is simply not enough to cover the cost of mortgage repayments or rent, even with an accommodation supplement.

Many of those who receive NZ Superannuation are working to supplement their income. The Massey report includes key findings of a survey of 1000 retirees which shows that around one third of people over the age of 65 are in some form of employment.

NZ Superannuation payments increase on 1 April every year as the amount paid is linked to the average wage. In theory, this increase allows for inflation, however it can be argued that the rate of inflation for retirees is different than for the average population and is probably higher. The key drivers for high costs of living for retirees are home ownership, property maintenance, property rates, and insurance – all of which have had big increases in recent years. If increases in NZ Superannuation don’t keep up with these costs then retiree incomes will decline in terms of purchasing power.

Covering the gap between NZ Superannuation and retirement living costs is becoming a major problem for retirees.

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