Most young people believe there will be significant changes to New Zealand Superannuation by the time they retire, according to a new survey conducted by the Westpac Massey Fin-Ed Centre.
In an interim update to the Centre’s 20-year longitudinal study, participants, now aged between 21 and 26 years old, were asked about their finances and their attitudes to New Zealand Superannuation.
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Nearly 45 per cent believe New Zealand Superannuation will not be sufficient in retirement and 84 per cent believe the age of eligibility for the benefit will increase by the time they retire. Sixty-three percent of respondents also believe the benefit will eventually be means tested.
Report co-author Dr Claire Matthews says the survey provides evidence that younger New Zealanders accept that they will not retire with the same level of government support as today’s retirees.
“The people who are most opposed to the age of eligibility increasing are those currently retired or close to retirement,” she says. “Yet younger people, who will be the most affected, are already getting the message that receiving New Zealand Superannuation at age 65 is reasonably unlikely.
“The truth is it’s not sustainable for NZ Super to be available at 65. The government needs to move sooner, rather than later because the longer they leave it, the harder it is going to be. With enough time, the age of eligibility can be raised gradually, which lessens the impact on everyone.”
Westpac’s head of investments and insurance, Suzanne Wolton, says: “it’s great to see that over 90 per cent of survey participants have taken control of their retirement plan by enrolling in KiwiSaver.
“But less than 30 per cent of those people are contributing to KiwiSaver at the higher rate of 8 per cent, so there is a large proportion of younger KiwiSaver investors who may need to assess whether they’re putting enough money away for their retirement.”
Nearly 50% dissatisfied with current financial status
The survey also found that over 43 per cent of respondents were dissatisfied with their current financial status, which had increased from 40 per cent in 2014 and 30 per cent in 2012.
And while nearly all participants saw the value of owning a home by the time they retire, many appeared overly optimistic about their prospects, with 86 per cent believing they will have a freehold home by retirement, significantly higher than the current home ownership rate of 64.8 per cent.
“That’s quite a significant gap between the expectation and reality of freehold home ownership”, Ms Wolton says. “It also emphasises the important role of KiwiSaver in helping people to realise their home ownership ambitions with the availability of the KiwiSaver first home withdrawal option.
Less than half the survey respondents were on track to achieve their retirement goals but 62 per cent felt “in control” of their financial situation and 73 per cent felt good about their money management skills.
“There is a concern that some young people are over-confident about their money skills,” Dr Matthews says. “To a large extent, they are still relying on advice from family and friends, although there’s a growing number researching on the internet as well, which you’d expect. Unfortunately, all these sources of information can be fantastic, but they can also be pretty doubtful.
“In the next phase of face-to-face interviews next year, we plan to take a closer look at their finances to see if they really are in control, or if it’s just their perception that they have good money management skills.”
To download the full survey report go to NZ Retirement Planning Study.