New Zealanders aged 50 years plus: Expectations for and experiences of retirement

1. Context
2. The study
3. Key findings
4. Points to consider

Context

The Commission for Financial Capability (CFFC) is working hard to get the next generation of retirees in good financial shape for life and for retirement. People are living longer and as such there exists an ageing population, meaning that in the future more people will be older. The dependency ratio (the number of people working versus the number of retirees the tax base supports) is changing. This means that under the current system in New Zealand (and elsewhere) a smaller number of working people will be supporting a larger group of retirees, and those in retirement will be in retirement for longer.

As part of looking at the changing landscape of retirement, the CFFC is looking at older New Zealanders’ expectations for and experiences of retirement.

The study

The survey sought to uncover the experiences of and expectations for retirement among New Zealanders over the age of 50. It was commissioned by the Commission for Financial Capability and the Financial Markets Authority. Undertaken in April 2015, the survey used an online panel, weighted by household income, age and gender to ensure that it was representative. There were 1,052 respondents and results are significant at the 95% level of confidence, with a margin of error of up to 3%.

Key findings

Financial security in retirement:

• 25% of retirees do not have enough money to do what they want to
• 46% have enough for some spending above basic needs;
• and 28% have enough to do what they want to
• Those who had had plans for retirement in place, extra savings and investment and higher household incomes were more likely to have enough money.    

Planning and preparedness for retirement:

• Among those yet to retire, only 11% thought they had enough additional savings and investments, while 47% did not, or not yet. 30% were not sure. 46% did not have a financial plan in place, and only 34% had calculated how much they would need.
• 78% planned to own their home when they retired. Overall, those who were single, in their early 50s, or had lower incomes were less likely to have planned.

Savings and investments:

• 90% of those yet to retire had savings or investments in addition to state superannuation.
• Those on lower incomes (21%) or with no plan in place (17%) were less likely to have any additional savings.
• 88% of retirees had extra savings or investments.

Investment choices:

• Those approaching retirement tended to choose lower- (66%) or medium-risk (58%) investments.
• 34% planned higher-risk investment. Those who had planned were more likely to spread investments to include higher risk.
• Overall, those yet to retire expected to rely more on lower-risk investment (70%) after they retired. Men and those with a financial plan, enough money already and higher household incomes were more likely to choose medium- and higher-risk investments.
• Among retirees, 92% relied on lower-risk, 33% on medium- and 39% on higher-risk investments. Those who had planned were more likely to embrace medium- and higher-risk investment.

Attitudes to risk and return:

• Overall, respondents were wary of higher-risk investments. 83% believed it worth avoiding such levels or risk, although 97% understood that higher risk tends to be associated with higher potential returns.
• Only 24 % overall had completed a risk profile questionnaire; those who had done so were less likely to avoid higher risk (although this is an association rather than causation), were younger and had generally undertaken wider planning and had higher incomes.

Expectations of return:

• Some New Zealanders may have high expectations about levels of return. Most felt annual returns below 5% to be “fairly low”, 9% to be “medium” and over 15% to be “fairly high”. But there was wide variation, particularly for medium and high rates of return.
• Overall, women, those in their early 50s, on lower household incomes, yet to retire, and those who had planned less or had no additional savings were more likely to have higher expectations. (This is based on those whose responses were above the 75th percentile.)

Points to consider

Methodological limitations:

• A strongly quantitative survey that reveals many similar trends, but there is no claim to or evidence of causation.

Generalisability/ transferability:

• Reliable across the New Zealand population over 50, but wider economic and financial contexts and arrangements vary from the UK.

Full report

New Zealanders aged 50 years plus: Expectations for and experiences of retirement - full report