New Zealanders on superannuation are paid a smaller proportion of the average wage than many OECD countries – and we’re getting less than half of the average wage before tax. That’s far behind the top three countries in the Organization for Economic Co-operation and Development, which all give their pensioners more than 100 per cent of a working wage when they retire. In fact, in the top country, Croatia, retirees get a whopping 129 per cent of a working wage – more than if they were actually working at the average wage. India (99 per cent), Portugal (95 per cent), and Italy (93 per cent) also have pension rates higher than the average wage. New Zealand’s rate languishes 11th from the bottom of the 65 countries, followed by Australia, 10th from the bottom.

What we get

For single people, the after-tax NZ superannuation rate is set at around 40 per cent of the ‘average ordinary time wage’ after tax, which this year works out at NZ$24,721.84 gross a year, paid at NZ$950.84 a fortnight before tax. Many people accustomed to life on the average wage when they worked will find they face a shortfall to live at the same standard after retiring. This is creating a demographic change worldwide. Across the OECD, more older people are staying at work. The World Economic Forum (WEF) found about half of people older than 65 work part-time on average over those countries.

It could be worse

At the other end of the scale, you wouldn’t want to be retiring in the UK. Pensioners there get a pretty raw deal, the worst of any OECD country, says the WEF. They get just 29 per cent of a working wage when they retire. Compare that to the OECD average of 63 per cent, or the average for its EU neighbours of 71 per cent. In the United States, the pension rate is 49 per cent of a working wage. In China, the rate is 83 per cent, OECD data shows. In New Zealand, NZ Super isn’t means-tested, which means everyone gets it who qualifies, regardless of how much they have in savings or assets. This isn’t the case in, for example, Portugal or Australia.

Crisis ahead

Meanwhile, we’re living longer. The World Bank has found that retirees in the six countries with the largest pension systems are living between eight and 11 years longer than they did in 1960 – and longevity is still going up. That creates big stresses on countries’ economies, says the WEF, which called it a ticking time bomb. “The anticipated increase in longevity and resulting ageing populations is the financial equivalent of climate change,” says Michael Drexler, of the WEF.

NZ Super set at 65

New Zealand is holding its retirement age at 65, but the age when you get a pension is going up in about one-third of OECD countries. And in Denmark, Finland, Italy, the Netherlands, Portugal and the Slovak Republic, your age to get it will be linked to the country’s average life expectancy. In 2017, the UK government suggested the state pension age will rise to 68 between 2037 and 2039. Three countries already have future retirement ages that are over 68 years: Denmark, Italy and the Netherlands.

What to do about it

Some Kiwis say they can live on NZ Super payments alone, but many will find themselves with a shortfall to get the retirement lifestyle they want. You can take steps now to help you reach an income you feel comfortable with in retirement. You could:

• See a financial adviser who can help set you on track for your goals. A financial adviser can help determine which investment types suit your personal situation.

• Start saving now. The earlier you start saving, the greater your KiwiSaver balance could be at retirement. And remember the government and your employer contribute to KiwiSaver. Not many countries in the OECD study have the equivalent of KiwiSaver.

• Invest your nest egg in a managed fund or in your KiwiSaver account, where your fees will probably be less, rather than leaving it in the bank.

• Work fulltime for longer than age 65 and invest your NZ Super, which may help make it last longer.

• Work part-time in retirement to supplement your savings.

• Downsize your home to clear your mortgage and invest any money remaining after you’ve bought your new house (provided it was cheaper!)

Published 28 November 2019

This article does not contain any financial advice and has not taken into account any particular person’s circumstances. Before relying on it, we recommend you speak with a financial adviser. This story reflects the views of the contributor only. Content comes from sources that we consider are accurate, but we do not guarantee that the content is accurate.