1 Introduction
The topic of saving continues to demand widespread attention. At the aggregate or economy wide level there are questions about the rate of saving and its implications for investment, long term growth and the sustainability of the external balances a country has with the rest of the world. At the household level there are concerns about the ability of households to save for retirement.[1] These concerns have become heightened globally, as populations age (Heller, 2003).
This paper is concerned solely with the second of these questions: the accumulation of retirement wealth by New Zealand households. Our analysis is based on the findings of the Household Savings Survey (HSS). This survey, conducted in 2001 is the first comprehensive view of the assets and liabilities of New Zealand households, and provides detailed estimates of the net worth of households. We can estimate the amount that people had accumulated by the time of the survey. As this survey is for one year only it does not provide information on the rate of saving as such.[2] However, based on this information we can make an initial attempt to address the question: are New Zealanders adequately preparing for retirement? Given the particular criterion of adequacy that we adopt, we find little evidence of widespread under-saving for retirement. We emphasise the important role the New Zealand Superannuation plays in placing a floor under the incomes of retirees. As NZS represents such a significant part of the retirement wealth for some 40% of the population, the life cycle approach we adopt in this paper predicts that a significant proportion of this group, typically in the lower quintiles of the income distribution, would not be expected to reduce their present consumption in order to save further for their retirement. In this sense, the finding from surveys that many New Zealanders are not saving for retirement is unsurprising.
Notes
- [1]See The Treasury (2003).
- [2]Information on the assets and liabilities of individuals will be collected in future every two years in the Survey of Family Income and Employment (SOFIE). The sampling for SOFIE will cover all individuals in the household. In the first instance this will mean that the estimates of net worth from Wave 2 of SOFIE will not be strictly comparable to those from the HSS which sampled individuals within a selected household. However once Wave 4 of SOFIE is released, it should be possible to form more accurate estimates of savings rates.
