Even retirees not safe from inequality
by Max Rashbrooke • April 18, 2013 • Articles, Comment • 1 Comment
A couple of recent reports have shown that even New Zealand’s pensioners – who do relatively well financially, compared to other age groups – are increasingly threatened by the spectre of inequality.
The first, by Kay Saville-Smith of the Centre for Research, Evaluation and Social Assessment, argues that many young people will not be able to afford to buy a house in their working lifetimes.
As a result, they will face “privation” in retirement as they have to pay market rentals on a state pension, which while adequate – it works out at around $18,000 for a single person – is hardly generous.
Of course, this doesn’t affect those better off workers – the top 10% – who will keep on being able to buy houses.
Another report, for the Commission for Financial Literacy, argues that inequality among pensioners is set to rise. One of its authors, David Preston, told a recent conference: “What you have is a peculiar situation where the two extremes of the retired population are both growing rapidly.”
While people who had been in well paid employment would enter retirement with Kiwisaver nest eggs and their own homes, those who had not – especially beneficiaries – would be moving into retirement “in a poor financial state”.
What all this points to is that even New Zealand’s better achievements, such as the way we keep most pensioners out of poverty through a universal benefit, have relied on invisible support: notably, home ownership.
The fact that most people own their own homes is what has allowed them to have a decent standard of living in retirement. Now that easy access to home ownership has been taken away, that reliance has been exposed.
Once again, inequality in housing is shaping up as a critical factor in how we live in New Zealand – and the case for concerted house building is becoming ever stronger.
Back in the day….as the saying goes, 1982 to be precise, my wife and I built our first home in Dunedin for 40k all up, not an exceptional price by any means, but the means by which we managed to achieve it was an example of what made New Zealand a great place to be….back then. We managed to save the 20% for a deposit, received a first mortgage from The Housing Corporation at 9 yes that’s 9%, the balance as a second mortgage from a bank at a rate that makes me shudder! However, my point is that there was once a Government agency that positively encouraged young people into home ownership. The benefits of which we are now experiencing as we devolve into our retirement years. So what was so bad about Housing Corporation loans that the past 30 years of so called liberal economic thinkers found so distasteful? Not enough profit in it for their banker mates? Me cynical….you betcha.