Superannuation rates and increases

New Zealand Superannuation increased by 2.31% from 1 April. This gives an income of around $12,800 - $16,500 per person (after tax) annually. 

For some older people, this isn't enough to cover even a basic standard of living. 

The latest increase

Cost-of-living increases currently only happen once a year. In the latest rise, from 1 April, singles living alone got an extra $6.60 a week (after tax). Couples got an extra $5.52 each. 

Government says the increase of 2.31% was made up of –

• a 1.96% increase in the cost of living as measured by the Consumers Price Index (CPI) for the year to 31 December 2009
• plus a small top-up to restore couples to 66% of the net average individual wage [see our objections to this formula, below]. 

This cost-of-living increase is nothing to do with the promised 2.2% increase which would be paid immediately if / when GST is increased.

Comment

Age Concern doesn't think this increase covers the real cost increases that older people are facing.

• For example, food has increased 10.9% over the past two years (to Dec 09).
• Power: Rises in domestic electricity prices since 2000 have averaged 5% p.a., much faster than inflation.
• Rates: most older people are home owners on limited incomes, yet local authority rates are still increasing by more than the overall CPI.

Age Concern calls for Super to be increased to the maximum allowed by existing legislation. This would raise it to 72.5% of the net average wage - around an additional $25 to $30 per week after tax.

We also say that the average weekly wage for one person should be compared with the weekly single National Superannuation rate (not for two people, as at the moment) - then New Zealanders would really see how little seniors really get to live on.

How much do I get?

To be eligible,  you need to be aged 65 or over and a legal resident of New Zealand, having lived here for ten years since age 20. Five of those years have to be since you turned age 50. Super is paid fortnightly into a bank account.

NZ Super is treated as income, so will be taxed at the M rate before you get it. If you have significant other income, your Super payment ‘in the hand’ may be less than shown below, because of higher tax rates.

Latest rates 

Gross and Net (after tax at ‘M rate’) rates of NZ Superannuation / Veterans' Pension

^{> SOURCE see Work and Income New Zealand for all the rates}

Myths about Super

1. I can’t get it if I’m working, or if I have investments

• Wrong – even millionaires can sign up when they turn 65. Other Work and Income benefits may have income or asset qualifications though.

2. NZ Super is "the most generous scheme in the world"

• Mostly wrong – it depends where pundits set the poverty line. If it's defined as 50% of median income, NZ has the lowest proportion of older people in poverty in the OECD. If the bar is raised to a more reasonable 60%, NZ has the highest proportion compared to the EU [c. 34% in poverty]. In other words, most older New Zealanders live on NZ Super and a small supplementary income, and many are clustered at a subsistence-only income level. [Koopman-Boyden & Waldegrave, Family Centre Social Policy Research Unit, 2009. Link to PDF].
• In OECD countries, the average incomes of over-65s are around 80% of overall household disposable income.  Our comparable figure is 70%, placing us 2nd-bottom in the OECD. [Len Bayliss, quoting Pensions at a Glance, OECD, 2009]
• New Zealanders also get few of the seniors' subsidies, cold weather bonuses, and emergency payments that other nations have.

3. I’ll just hang back from applying until I really need it.

• Although choosing to apply for Super or not may be a moral decision, it is available to most senior New Zealanders. You should be also be aware that it can’t be back-dated or recovered once the payment period has passed. Work and Income recommend applying a few weeks in advance of your 65th birthday to ensure you get it from Day 1.

4. It is set at around 65% of the average full-time wage.

• Wrong – the rate for a couple is currently around 66% of the average per person full-time wage. Income for two people is being compared with income for one. The rate of National Super for an individual is around 40% of the individual average wage.

Facts about older people's incomes

• New Zealand Superannuation (NZS) only gives an annual income in the hand of around $12,800 - $16,500 per person ($17,814 to $19,425 before tax).

• Super is currently around 27% less than even the minimum wage ($510 before tax / 40-hour week or $26,520 annually).

• Around 60% rely on publicly provided retirement income (NZS) as their most significant source of income.

• Their median annual income is significantly less than the national median income of $24,400. For people aged 70-74, the median annual income is just $14,800. Older women earn even less, for example $1000 a year less for 70-74 year-olds.

• In real terms, older people's incomes have stayed flat since 1988, despite society's overall increases in living standards since then. (Source: MSD Positive Ageing Indicators 2007).

• Median incomes for Maori, Pacific and Asian older people are lower. Maori and Pacific elders are on average more reliant on NZS and are less likely to have other assets.

• In terms of standard of living, research indicates around 66,000 older people (13%) are likely to be experiencing some hardship, with more than 35,500 older people in severe hardship. Older people with high accommodation costs are more likely to experience hardship.

• New Zealanders' unusually high ownership rate of mortgage-free homes has provided a cushion preventing many older people from dipping below the poverty threshold, yet home ownership rates are falling fast.

Resources

> VISIT Work and Income New Zealand for all the rates

>VISIT the Ministry of Social Development Services for Seniors website