2022 Arotake o ngā Kaupapahere Moniwhiwhi Ahungarua 2022 Review of Retirement Income Policies
The Retirement Commissioner is required by law to carry out a Review of Retirement Income Policies (RRIP) every three years in response to terms of reference set by the Government.
For the 2022 RRIP we have been asked to undertake research relating to three broad areas comprising New Zealand Superannuation, housing and private savings including a focus on decumulation and KiwiSaver.
1. An update and commentary on the developments and emerging trends in retirement income policy since the 2019 review, both within New Zealand and internationally.
The Ministry of Business, Innovation and Employment (MBIE) has provided an update on KiwiSaver since the last review in 2019 (available here).
The Ministry of Social Development (MSD) has provided an update on NZ Super since the last review in 2019 (available here).
The OECD publication ‘Pensions at a Glance’ 2021 provides an update on international developments and emerging trends (available here).
We are undertaking qualitative research to produce a ‘Voices of Older New Zealanders’ report. Dr Jo Gamble is conducting focus groups with older people in various locations across the country to gain a deeper understanding of people’s experience in retirement (from a retirement incomes perspective). This report will be released in July.
2. The impact of government policy on the retirement savings outcomes and experiences of Māori as Treaty partners, and of Pacific Peoples and women.
We are undertaking qualitative research to understand ‘What does retirement look for Māori?’ We had planned to hold hui to hear directly from Māori about what retirement looks like for Māori. However, the impacts from COVID-19 meant those hui were not able to be held. Dr Kathie Irwin instead invited Māori to complete an online survey, and asked people to address the focus questions the hui would have explored. Analysis of these findings will be included in her research report.
The Ministry of Pacific Peoples is interviewing people from nine Pacific backgrounds to research ‘What does retirement look for Pacific Peoples?’. Research will take the form of talanoa (conversation) with the participants and their extended families in a number of regions throughout Aotearoa New Zealand, including Auckland, Hamilton/Tokoroa, Wellington and the South Island and will result in a report.
We have also undertaken research on ‘What does retirement look for women?’. Dr Suzy Morrissey (Director, Policy) has prepared a report that examines women’s current situation in retirement and investigates some of the causes, such as gender and ethnic pay gaps and the gender segregation of the labour market, as well as the unequal division of unpaid work (including care work) between men and women. Read the report here.
3. Ensuring the 2022 Review of Retirement Income Policies has sufficient use of distributional analysis, cultural and gender lenses to understand the different impacts of retirement policies across New Zealand.
We will ensure this is undertaken across all the research, analysis, and recommendations.
Dr Kathie Irwin has written and commissioned a series of technical papers to assist in this regard. They are as follows:
- Paper One Decolonising Public Policy: The Galaxy, The Gavel and The Gun by Dr Kathie Irwin
- Paper Two: Literature Review of Published Research by Dr Margaret Kempton
- Paper Three: Māori Demography 2040 by Len Cook
- Paper Four: What the people said, about ‘what retirement looks like for Māori’ by Dr Kathie Irwin (this paper is referred to under Term of Reference 2).
4. New non-government initiatives to encourage people to save in a complex COVID environment, in collaboration with the private sector.
We are working with our National Strategy for Financial Capability partners and other private sector representatives to consider new initiatives to encourage people to save.
5. Policy considerations (including design and product availability) for decumulation of retirement savings from KiwiSaver and other retirement savings schemes and assets after reaching the age of NZ Super eligibility.
Dr Michelle Reyers has written a paper on policy insights regarding decumulation. She has distilled prior decumulation research from NZ and overseas into specific policy recommendations for consideration in the 2022 RRIP. Read the report.
6. Policy considerations arising from the exclusion of people from KiwiSaver who hold temporary, visitor, work or student visas.
The New Zealand Work Research Institute at Auckland University of Technology undertook a research project utilising Stats NZ's Integrated Data Infrastructure (IDI) to investigate how inbound migrants become eligible for and members of KiwiSaver. Read the report.
The research covered three areas. The first was the size of the population who experience KiwiSaver ineligibility, which was determined by examining a particular cohort of inbound migrants on arrival (in 2009) and over 10 years (to 2019), tracking whether they remain in New Zealand and their visa status (whether they have moved from a temporary visa to a resident class visa). The research also revealed demographic details (age, sex, nationality and ethnicity) of this cohort. The final element of the research was to determine if and when people in the study cohort joined KiwiSaver, and to compare the enrolment rate to those migrants arriving in 2009 on a resident class visa.
The findings were as follows:
- Of the original 70,305 temporary migrants from 2009 10,000 temporary migrants remain ineligible for KS after five years
- Temporary migrants are young, on average, age 24 for student visa holders and age 30 for work visas
- Men and women equally transition to resident-class visas
- As a conservative estimate, about 28,000 of employed temporary migrants might have potentially joined KS if eligible, from the 2009 cohort
- Lost individual KS contributions are estimated to be in the range of $36,000-$51,000 by time they reach 65 years old (depending on the fund type)
This research helps clarify the period of time spent on temporary visas (potentially a ‘lost’ period of saving for retirement) and the ‘adoption rate’ of KiwiSaver by new migrants and will inform our consideration of recommendations to change policy settings.
7. Income adequacy of NZ Super for future retirees who are renting a home or do not own their own home outright.
The findings were as follows:
- Relative to NZ Superannuation, the housing costs for senior households were highest for those with a mortgage, somewhat lower for those paying rent, and much lower for those who own outright.
- Longer-term, there seems to be a shift from owning outright (with low housing costs) to paying rent (with high housing costs), within households with head-of-household in the 45-54 and 55-64 age bands.
- There also appears to be a shift from owning outright to having a mortgage for households whose head-of-household is in the 65-74 band.
- The proportion of seniors paying greater than 20% of their NZ Super income on housing looks to have been increasing for those paying rent and for outright owners.
- Senior households that pay rent are much more likely to be spending 40% or more of their NZ Super income on housing, and long-term trends suggest that the number of senior households paying rent will increase in the future.
These findings are based on examination of the extent to which NZ Super covers the costs of housing, and how various factors, such as people buying houses later in life, lower levels of home ownership, and larger mortgages that may not be paid off before a person retires, impact on the ability to cover housing costs in retirement using New Zealand Superannuation. Dr Luke Symes lead this work.
8. The impact on retirement income adequacy, and retirement planning for New Zealanders who live abroad, of the proposed change to a 20-year residency eligibility period for NZ Super.
The New Zealand Work Research Institute at Auckland University of Technology utilised Stat NZ's Integrated Data Infrastructure (IDI) to investigate how the upcoming residence change to eligibility for New Zealand Superannuation might impact Kiwis who spend time working overseas. Read the report (here).
The research tracked three cohorts of New Zealanders who left to go overseas for at least a year. Of those departures in 1998, the research identifies the period of time spent overseas (up to 5, 10, 15, and 20 years). The research also tracks emigration of New Zealanders in 2005 and 2010 and their emigrant or returned status as at 2019.
The research provides the greatest detail for one cohort only, and departures in other years may have been different. Despite these caveats, the research details the duration of absence (to consider whether the need to spend 20 years in New Zealand will make many people ineligible for NZ Super).
The findings were as follows:
- For the 1998 cohort, about 87% were residing overseas at 2 years, just over 75% at 5 years and about 69% at 10 years. By the end of the 20-year follow-up period, about 64% of the 1998 emigrant cohort were residing overseas. At 10 years, 73% of the 2005 cohort were residing overseas.
- Across all three cohorts, emigrants aged 45-64 are more likely to reside overseas over time than the younger cohort aged 20-44, who return to reside in NZ more quickly.
- Returnee emigrants in the 1998 cohort take 5.9 years, on average, to first return to reside in NZ. For returnee emigrants in the 2005 cohort the average is 4.9 years, and for returnee emigrants in the 2010 cohort the average is 4.0 years.
- The research could not identify the countries in which the cohorts were living due to gaps in the data. However, the OECD collates data on the foreign-born population in OECD countries, and this information is included in the research report.
- Three of the countries in the ‘top five’ (by number of resident NZ-born people) are those with whom we have Social Security Agreements (namely Australia, the UK, and Canada). Australia is by far the largest destination with almost 82%. The other countries in the ‘top ten’, with whom NZ does not have SSAs, are the USA, Japan, France, Switzerland, and Sweden.
These outputs help clarify the impact on New Zealanders of the change to the NZ Super policy settings.
9. How diverse housing options for seniors would have different impacts on pre-retirement savings and retirement income. The work should be complementary to that undertaken by the Office for Seniors and other relevant agencies.
The Ministry of Pacific Peoples interviewed people from nine Pacific backgrounds, in two age groups, to understand their housing experiences and preferences, before and after retirement, focusing on those who live in multi-generational housing arrangements. Read the report here.
Dr Jo Gamble surveyed pre-retirees on their housing preferences and how this impacts their current savings. Read the report here.
With the help of the Ministry of Pacific Peoples, she also asked the same questions to people from nine different Pacific ethnicities. Read the report here.
Dr Gamble also conducted qualitative interviews with people who live in co-housing arrangements, to better understand their income sources and areas of expense relating to housing.
Cohousing is an alternative model of living that has the potential to address barriers to homeownership and provide an accessible community that some people lose as they get older. The report explores three different examples of cohousing models as case-studies for older people’s housing: Earthsong Eco-Community in Tamaki Makaurau / Auckland; Peterborough Housing Cooperative in Ōtautahi / Christchurch; and Abbeyfield New Zealand. Read the report.