Working Paper 03/04 - Assessing the Adequacy of Private Provision for Retirement: A Living Standards Perspective

This paper presents a living standards perspective on the adequacy of private provision of retirement income. It focuses on overall asset accumulation rather than solely on retirement income. This is because retirement living standards are affected by private provision in the form of both assets that offset living expenses (and the requirement for private retirement income) and assets that generate income.

Given the private provision for retirement that the current cohort of older people had made, New Zealand Superannuation and associated payments were sufficient to enable the majority to avoid hardship. However, emerging trends suggest that the pattern of asset accumulation that has been successful over the working lives of the current older population may not necessarily transfer successfully to future cohorts.

A substantial change to the profile of the living standards distribution of older people will be the higher proportion of older Maori and Pacific peoples, the majority of whom will have low living standards should the current disparity evident for these groups continue.

Three asset accumulation and retirement outcome scenarios are explored. An examination of these scenarios highlighted two key areas of focus for ensuring adequate private provision for retirement:

• the ongoing promotion of savings behaviour and asset accumulation
• the need to investigate ways of assisting low income people to accumulate assets for retirement (whether in the form of home ownership or otherwise).