Houses crowd out retirement savings

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A focus on housing appears to be crowding out retirement in people’s savings plans, according to the latest AMP SuperWatch survey.

Monday, December 8th 2003, 12:08PM

While other savings categories have remained fairly constant, the number of people saving for a home purchase has increased by 70% since January this year, from 10% to 17%. People aged 25-34 are even more likely to be saving for a house deposit, with 35% saying they are currently doing so.

Despite the increase in the numbers saving for a deposit, there has been no increase in the proportion of people saving to pay off their house, says AMP managing director Ross Kent.

"The focus on saving for house deposits seems to be leaving people with less discretion about other forms of retirement savings. Since the beginning of the year there have been significant declines across seven retirement savings categories. Those paying off a mortgage have declined by 58%, saving into bank or term deposits have declined by 63%, and those saving for retirement by investing in their own business have declined by 60%.

"The increase in people saving for house deposits may indicate several things. The property boom may be pushing home purchase further away for younger, first home buyers. With demand outstripping supply, people may be having to save more to buy a house they desire.

"Results may also indicate that first home buyers are thinking that they need to save to get in on the property market now before prices are inflated too far out of their reach.

"Buying a house is still very much part of the New Zealand dream, but there are worrying signs that it becoming all consuming and swamping any other kind of saving people do."

Kent says another notable result has been a big jump in the number of people who consider current levels of New Zealand Superannuation would be adequate to support them in their retirement.

"In August 2001 only 21% of people thought the pension would be adequate support, but that has increased to 32% in the latest survey. However, only 23% of people are confident that a similar level of pension will be available for them when they retire – a result consistent with previous SuperWatch surveys.

"Another notable increase has been in people who are expecting the government, families, the community and employers to take some responsibility to provide for them in retirement.

"These SuperWatch results show there is no room for complacency over retirement savings. Every little bit will help people do the things they want to be able to do in retirement, and the sooner they start the better," says Kent.

 

1. Which one of the following are you currently saving for?

	August 2001 (%)	June 2002 (%)	Jan 2003 (%)	Nov 2003 (%)
Paying off your house	35	38	38	36
A new car	11	12	16	13
Travel or holidays	34	38	35	37
Superannuation/retirement	46	50	45	47
Setting up or investing in your own business	12	10	12	15
Your own or your children’s education	24	26	30	29
Deposit for a home purchase	12	12	10	17
None	17	13	16	14
Don’t know	1	-	1	2
All Respondents	(502)	(554)	(654)	(662)

2. Which of these are you currently doing to save for your retirement?

	August 2001 (%)	June 2002 (%)	Jan 2003 (%)	Nov 2003 (%)
Paying off a mortgage on your home	33	38	36	15
Have a formal, long term superannuation plan	38	43	43	34
Bank or term deposit investments	28	28	34	13
Investing in shares	25	25	30	11
Unit trust investments	19	16	18	9
Investing in your own business	17	14	15	6
Residential property other than your own home	18	18	17	10
All Respondents	(502)	(554)	(654)	(662)

 

3. New Zealand Superannuation, that is the pension paid by the Government in retirement, is currently $245 per week after tax for a single person living alone or $377 per week after tax for a married couple. If you were retiring today, would this be adequate to support you in your retirement?

	August 2001 (%)	June 2002 (%)	Nov 2003 (%)
Yes	21	19	32
No	75	78	65
Don’t know/no answer	4	4	3
All Respondents	(502)	(554)	(662)

 

4. Which of the following do you feel should take some responsibility to provide for you in your retirement?

	August 2001 (%)	June 2002 (%)	Jan 2003 (%)	Nov 2003 (%)
The government	67	65	63	71
Yourself	90	93	93	92
Your Family	15	13	15	20
The Community	7	5	4	10
Your Employer	20	26	25	27
Don’t know/no answer	2	-	-	1
All Respondents	(502)	(554)	(654)	(662)

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