Superannuation: It isn’t enough
Carl Forster of Napier says the cost of living has risen so much in the past six years he can no longer live on New Zealand Super without emergency food grants.
Forster, 74, lives in a modest rented flat, and as a garrulous man who enjoys helping others, he’s able to maintain social contact, but he says: ‘‘My food is limited. I go to Work and Income for a food grant every now and again.’’
It is a humiliating experience, he says. The money is loaded onto a green Work and Income payment card, which can only be spent in certain shops.
‘‘It’s demeaning really, but it’s becoming normal for me,’’ Forster says.
‘‘I feel that the Government should be putting NZ Super at a level people can live on without having to get food grants. The pension needs to rise by $50 a week.’’
Massey University’s Coviddelayed annual Retirement Spending Guidelines show that even with careful budgeting, NZ Super is too little to live on without either savings, or additional benefits.
Massey University researchers Pushpa Wood and Claire Matthews said the Consumer Price Index rate for the year ended March 31, 2020, was 2.5 per cent, while the increase in superannuation from April 1 last year was 3.08 per cent.
And yet the gap between the basic state pension and the amount households were spending to achieve a ‘‘no frills’’ lifestyle had increased.
Rises in household spending on food, housing, transport and utilities were the biggest causes, Wood and Matthews found.
Using actual household spending figures, they found all households receiving a state pension spent more than they received in NZ Super payments.
The cost of a ‘‘no-frills’’ lifestyle for a single person living in a provincial town was $162 a week more than NZ Super payments alone could cover.
In a big city, the gap would have been $280.
For couples, the gaps would have been $72 in a provincial town, and $183 in a big city.
Forster is an example of how people living no-frills existences are spending more than they get on NZ Super.
His rent is partially paid by the Accommodation Supplement, and then there are the humiliating extra food grants.
Since 2018, people getting NZ Super also get winter energy payments.
In all, the Ministry of Social Development said 47,415 people receiving NZ Super or Veterans’ pensions in March were also getting the Accommodation Supplement.
At that time just over 9500 people getting NZ Super or Veterans’ pensions were getting additional emergency support, and just under 132,000 were also getting the disability allowance.
The Massey researchers said some people continued to work after the age of 65 to cover the NZ Super spending gap.
Some supplemented it by spending savings, and income from their investments.
Wood and Matthews estimated that couples who wanted to bridge the NZ Super spending gap from savings would need lump sums of between $159,000 (for a single person to pay for a provincial nofrills lifestyle) to $756,000 (for a couple to pay for a choices lifestyle in a city).
But non-homeowners would have to save between $199,000 and $340,000 more, they estimated.
That would involve saving $80 to $135 more every week from the age of 25.
They are figures that make Forster despair for the future generations of retirees.
Forster worked in IT, but a divorce later in life hindered his ability to prepare for retirement. But he looks at the costs of homes and rents, and wonders how young people, especially those with young families, can expect to save those kind of sums.
‘‘The average New Zealander is not earning enough to save, and purchase their own home,’’ he says.
It is a concern that is casting a dark shadow over the future of retirement.
Wood and Matthews said retirement is now on the horizon for Generation X, and their lower level of home ownership will have implications for them.
Foster says there is only so much cost-cutting people like him can do.
His biggest cost rise has been rent, he says. He tried to save money by moving into a converted garage, but it was so cold that his doctor practically ordered him to move.
Forster suffered lung damage early in his working life in an industrial accident.
‘‘Six years ago, under the National Government – I’m not a Labour supporter, and never have been – was the last time I had a reasonable standard of living.’’