People opt to pay off house rather than save

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More people have focused exclusively on paying off their house at the expense of investing in any other form for the future, according to a survey.

Thursday, July 8th 2004, 7:05AM

More people have focused exclusively on paying off their house at the expense of investing in any other form for the future, according to a savings survey.

The number of people who identify paying off their house as a form of saving has increased 30% since November 2003 (from 36% to 47%). In comparison to May 2003 this is a 27% increase (37% to 47%).

The survey, conducted by AMP, also shows that there has been an overall downward movement in most forms of retirement saving during the past year. Participation in superannuation plans dropped 26% since May 2003 and is now at the lowest ever level since July 2000. Bank or term deposits dropped 48% and there was a 55% drop in the numbers who claim to be saving through direct investments in shares. Investing for retirement through a residential property other than the home remained the same at 11%.

"These figures show that paying for a home has become all-consuming as people are feeling the pinch from larger mortgages," says AMP managing director Ross Kent.

"In spite of the apparent softening in residential property prices, people still seem to regard getting into property as a key priority, while retirement planning appears to be lower down their list."

The research also shows that more 18 to 24-year-olds are saving for a house deposit. "Only 19% of this group was saving for a house deposit in November and that has now jumped to 35%," Mr Kent says.

The18 to 24-year-olds are also bucking trends in other areas. They’re less focused on travel, holidays or a new car, indicating that property is a bigger priority for them than overseas travel or updating their wheels. In November 2003 16% of this group were saving for travel and 23% for a new car. Those numbers have now dropped to 10% and 12% respectively.

"These figures show that the recent nationwide property boom is having an impact on younger people, who have realised they need to start amassing equity before spending on their lifestyle," Kent says.

Kent says another notable result is that there is an increase in the number of people who feel it is their responsibility, not the government’s, to provide for their retirement.

"In November 69% of people thought providing for retirement was their responsibility, now that has increased to 74%. There has also been a decline in the number who are confident that a government pension, similar to today’s level, will be available for them when they retire. In November that figure was 25% now it has decreased to 19%."

"New Zealanders will always want to buy property, even if that does mean putting all their (retirement) eggs into one basket. The continuing challenge for New Zealanders is to realise that, while retirement may be a long time off and there will often be pressing present demands on household funds, retirement saving needs to be kept on the priority list. It is a matter of weighing the priorities of short-term goals against long-term goals ‘A little and often’ may well be all that is needed to turn a ‘getting by’ retirement into a comfortable one," says Kent.

SuperWatch Results:

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

	July 2000 (%)	August 2001 (%)	Feb 2002 (%)	June 2002 (%)	Jan 2003 (%)	May 2003 (%)	Oct 2003 (%)	May 2004 (%)
Paying off your house	38	35	37	38	38	37	36	47
A new car	12	11	12	12	16	12	13	13
Travel or holidays	39	34	38	38	35	30	37	40
Superannuation/retirement	48	46	40	50	45	49	47	45
Setting up or investing in your own business	12	12	11	10	12	18	15	16
Your own or your children’s education	28	24	27	26	30	26	29	29
Deposit for a home purchase	14	12	13	12	10	12	17	13
None	14	17	19	13	16	16	14	14
Don’t know	-	1	-	-	1	-	2	-
All Respondents	(524)	(502)	(501)	(554)	(654)	(519)	(662)	(532)

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

	July 2000 (%)	August 2001 (%)	Feb 2002 (%)	June 2002 (%)	Jan 2003 (%)	May 2003 (%)	Oct 2003 (%)	May 2004 (%)
Paying off a mortgage on your home	41	33	39	38	36	24	15	12
Have a formal, long term superannuation plan	44	38	36	43	43	42	34	31
Bank or term deposit investments	32	28	29	28	34	21	13	11
Investing in shares	32	25	22	25	30	20	11	9
Unit trust investments	16	19	15	16	18	15	9	9
Investing in your own business	16	17	14	14	15	11	6	6
Residential property other than your own home	17	18	16	18	17	11	10	11
All Respondents	(524)	(502)	(501)	(554)	(654)	(519)	(662)	(532)

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

	July 2000 (%)	August 2001 (%)	Feb 2002 (%)	June 2002 (%)	Jan 2003 (%)	May 2003 (%)	Oct 2003 (%)	May 2004 (%)
The government	54	67	72	65	63	66	71	65
Yourself	91	90	94	93	93	94	92	93
Your Family	7	15	12	13	15	14	20	12
The Community	4	7	7	5	4	9	10	5
Your Employer	17	20	31	26	25	24	27	20
Don’t know/no answer	1	2	1	-	-	-	1	-
All Respondents	(524)	(502)	(501)	(554)	(654)	(519)	(662)	(532)

4) And which of these should take the greatest responsibility?

	July 2000 (%)	August 2001 (%)	Feb 2002 (%)	June 2002 (%)	Jan 2003 (%)	May 2003 (%)	Oct 2003 (%)	May 2004 (%)
The government	20	23	26	25	19	27	25	19
Yourself	74	70	67	68	75	68	69	74
Your Family	-	1	-	2	2	1	1	1
The Community	-	-	-	-	-	-	-	0
Your Employer	1	1	2	3	1	1	1	1
None	1	1	1	-	1	-	1	1
Don’t know/no answer	4	4	4	2	2	4	4	3
All Respondents	(524)	(502)	(501)	(554)	(654)	(519)	(662)	(532)

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