Here are some of the key background statistics that set out why for those who need or wish to remain in their own home, Equity Release schemes may be helpful options.
Life expectancy in 1971 was 67 years for males and 71 years for females. It is now greater than 80 years for both. When people turn 65, many can reasonably expect to live another 25 years and face the real challenge of funding their retirement years.
Over 60% of retirees depend largely or entirely on their income from New Zealand Superannuation (NZ Super). For many retirees, their only asset other than NZ Super is their home.
For those lucky enough to accumulate a retirement fund, the mean (average) individual net worth for the age cohort 65-74 was $750,000 in 2021. The average net worth for people aged 75+ was $583,000 in 2021. The median net worth for those aged 65-74 was $454,000 and $414,000 for those aged 75+. For those with retirement savings, the decline in net worth with age illustrates people funding retirement via asset disposal decumulation of capital or perhaps intergenerational transfers.
The population aged 65+ was estimated to hold $725 billion in a mixture of financial and nonfinancial assets. For example, pension funds, direct shares and bonds, ownership in their own businesses, life insurance contracts, etc. Of the total assets, over owner-occupied dwellings, a significant share of the asset pool accounts for 25% ($185 billion). Equity Release options allow these assets to be unlocked and used to support a better life in retirement.
While the majority (72%) of people aged 65+ do own their own home, many people are now entering retirement with a mortgage that is not entirely paid off. Household net worth statistics for 2021 estimate $6.5 billion of owner-occupied residence loans for those aged 65+.
Healthcare is necessary; unfortunately, many cannot afford to maintain health insurance policies with age. In the three months to 31 March 2022, $55 million was paid in insurance claims to people aged 60-64 years; for those aged between 80 and 84 years, only $20m was paid.
Superannuant living expenses have averaged more than the cost of living for all New Zealanders between 2008 and 2022 (2.4% vs 2.1%), which is likely to continue. Local authority rates have risen an average of 5.5% between 2002 and 2022, and local councils face huge infrastructure funding demands. Dwelling insurance has risen an average of 9.6% per year, and health insurance by 6.1%. These look like to maintain a strong price increase, which puts more pressure on retiree disposable income.
Many associate Equity Release with “living it up” or blowing the loot. While this might be the case for a few, for the majority, it’s just about maintaining a reasonable standard of living through a retirement life of 25 years or more. According to the Massey University Retirement Expenditure Guidelines, a two-person retired household living in a city living a “no Frills” retirement lifestyle could expect to pay regular living expenses of $931.17 per week when NZ Super only pays $712.22 per fortnight.
More people aged 65+ are working beyond the age of 65. More than 200,000 people aged 65+ remain in the labour force, and 80,000 are aged 70 and older. Almost 50% of the population aged 65-69 remain participants in the workforce. Some of this is because we live longer, some choose to remain active, and workplaces are social forums, but financial pressures mean many need to work.
According to the REVIEW OF RETIREMENT INCOME POLICIES undertaken by the Retirement Commission, 40% of people aged 65 and over have virtually no other income besides NZ Super, and another 20% have only a little more.
“66% of people aged over 65 own their home outright, 13% of people over 65 have a mortgage, and 20% of over 65s pay rent. The numbers are lower for Māori and Pacifika in terms of ownership and higher for renting.
Sadly, many retirees do not own their own homes, and the provision of rentals and financial accommodation support needs to be a key priority.
Even with NZ Super, close to 1 in 3, people don’t think they will have enough for retirement unless they continue working past 65.
Disability rises with age, putting additional financial strain on households. 59% of people aged 65 or over have a disability compared to 21% of adults aged under 65, and 11% of children.
We are an ageing country. We are experiencing both structural ageing (approximately a quarter of the population will be over 65 by the 2040s) and numerical ageing (nearly 1.4 million over 65s by 2040s). The population aged 75-84 is projected to almost double, and the population aged 85+ will rise by 250%.
Projections indicate that by 2040, for every person aged 65 and over there will be 2.8 people aged 15-64, compared to 4.2 people in 2020.
Retirement income is lower for women than men, on average, with almost 50% of women aged 65-69 receiving less than $30,000 p.a. More women are wholly reliant on NZ Super to fund their retirement than just a third of men.
People sometimes downsize their homes to free up cash. However, research (uncited by the Retirement Commission) indicates that people are now finding it harder to downsize due to a lack of appropriate properties. It would be beneficial for older people if there were more suitable accommodation options, including smaller one or two-bedroom modern and accessible properties, which would enable the release of larger family home stock and reduce the maintenance needed and council rates that seniors must pay.”
As the population ages, net government debt is projected to rise towards 180% of gross domestic product, an unsustainable outcome. There will be pressure to increase taxes, cut spending or reduce entitlements.
