Staff Reporter –
A majority of young New Zealanders believe that the country’s Superannuation scheme will undergo significant changes by the time they retire.
This is the finding of a Survey conducted by the Westpac Massey Fin-Ed Centre.
The Survey had respondents in the 21-26 age group, and was an interim update to the Centre’s 20-year longitudinal study.
About 45% of the respondents were of the view that the New Zealand Superannuation Scheme would not suffice when they retire, while almost 85% of the participants said that the age of eligibility for the benefit will increase by the time they retire.
About 63% of those surveyed said that the benefit will be eventually mean-tested.
Report co-author Dr Claire Matthews said that the Survey provides evidence that younger New Zealanders accept 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. 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,” she said.
The truth is it is not sustainable for New Zealand Super to be available at 65, she added.
“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,” Dr Matthews said.
Westpac Head of Investments and Insurance Suzanne Wolton said that over 90% of Survey participants had taken control of their retirement plan by enrolling in KiwiSaver.
“But less than 30% of those people are contributing to KiwiSaver at the higher rate of 8% and hence there is a large proportion of younger KiwiSaver investors who may need to assess whether they are putting enough money for their retirement,” she said.
The Survey also found that more than 43% of respondents were dissatisfied with their current financial status, which had increased from 40% in 2014 and 30% in 2012.
While almost all participants saw the value of owning a home by the time they retire, many appeared overly optimistic about their prospects, with 86% believing that they will have a freehold home by retirement, significantly higher than the current home ownership rate of 64.8%
“That is quite a significant gap between the expectation and reality of freehold home ownership. 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,” Ms Wolton said.
Less than half the survey respondents were on track to achieve their retirement goals but 62% felt ‘in control’ of their financial situation and 73% felt good about their money management skills.
Dr Matthews said that there was a concern that some young people are over-confident about their money skills.
“To a large extent, they are still relying on advice from family and friends, although there is a growing number researching on the internet as well, which you would expect. Unfortunately, all these sources of information can be fantastic, but they can also be pretty doubtful,” she said.