Most New Zealanders expecting to eat their houses in retirement
Tuesday, November 21st 2000, 6:10AM
John Drabble, General Manager AMP Financial Services, says the AMP Superwatch research shows that although New Zealanders’ savings habits are changing, there is still a substantial shift needed for people to afford the life they dream of in retirement.
AMP conducted the AMP Superwatch survey of 470 New Zealanders aged 18 and over during September and October 2000. The research showed that people are getting the message about needing to save for their retirement.
"Forty nine percent of people surveyed are currently saving for their retirement, over and above what they expect the government to provide.
"But of those earning under $50,000 per annum, only 33% are currently saving for retirement, which raises the question whether the right incentives currently exist to encourage the majority of people to save.
"Higher income earners - over $60,000 - recently received a small tax incentive for retirement savings by keeping the tax rate on employer superannuation contributions at 33% compared with their marginal rate of 39%. We believe there is scope to extend this incentive to lower income earners.
"Putting all your eggs in any one basket is a risky strategy, particularly with retirement savings. Relying on residential real estate to fund retirement is unlikely to provide the good life that New Zealanders want.
"By comparison with Australia, for example, New Zealanders already rely much more heavily on residential property for long term savings. In New Zealand, residential property is about 67% of household assets compared to only about 50% in Australia," says Mr Drabble.
In Australia, people favour a mix of government-funded, employer contributions and voluntary savings.
According to Lynn Ralph, CEO of Australia’s Investment and Financial Services Association, who AMP brought to New Zealand last week, this approach, while not perfect, is working and encouraging people to save.
"The problem is that with so many New Zealanders having the same idea and aiming to sell their house at roughly the same time, supply will outstretch demand, and rather than making a profit people may find themselves suffering a loss when they can least afford it.
"Retired people also want modern, low maintenance homes, which often end up costing about the same as what they can sell their older family homes for.
"By thinking ahead and preparing a separate retirement plan, you can have your cake and eat it too. Paying off debt is important, but there are smarter options than viewing a mortgage as a prepaid retirement fund.
"People shouldn’t gamble solely on making a profit from their house sale to fund their retirement years, they need to consider and invest in other forms of saving if they want certainty," says Mr Drabble.
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