New Zealand is finally catching up with the rest of the world and considering changing the age of eligibility for NZ Superannuation from 65 to 67. However, the four-year process to make this transition doesn’t start for another twenty years. In the interim, the number of pensioners is burgeoning and life expectancy is increasing.
When the old age pension was first introduced it was intended to allow people to enjoy a few short years of rest before the end of life. That was in the days when people didn’t often live past their 70’s. NZ Superannuation is set at 65% of the national average wage. That’s enough to cover usual weekly expenses, but not enough to allow money to be saved to replace a car, maintain a house or enjoy overseas holidays. While it is possible to live from week to week on a low income for a few years, increased life expectancy means that retirees now face spending perhaps 30 years or so on a meagre income. During that time, there are many unexpected or unavoidable expenses which cause huge financial stress.
Statistics show that around 40% of pensioners rely solely on NZ Superannuation for their retirement income, and for a further 20%, NZ Superannuation makes up 80% of their income. The prospect of living on such a low income for a long time is a daunting one. For those pensioners who are lucky enough to have a retirement nest egg, investment returns are low. The combination of low pensions, low rates of investment return and increased longevity means that the elderly are facing an increasing probability of living in poverty in the final years of life. It is no surprise that 40% of people aged 65 to 68, and 20% of people aged 70 to 74, are still working.