There have been many news articles talking about the rising number of older people renting. So I thought I would do a little investigation to see if an older person could rent and afford to ‘live’ on NZSuper alone.
NZ Superannuation payments increase on April 1 every year as the amount paid is linked to the average wage. In theory, this increase allows for inflation, however it can be argued that the rate of inflation for retirees is different than for the average population and is probably higher. The key drivers for high costs of living for retirees are home ownership, property maintenance, property rates, and insurance – all of which have had big increases in recent years. If increases in NZ Superannuation don’t keep up with these costs, then retiree incomes will decline in terms of purchasing power.
In New Zealand, the maximum amount an older person can receive from New Zealand Super fortnightly is the single person living alone rate of $$950.84 (before tax)(as at 1 April 2019).
The minimum wage in New Zealand is $17.70 for an adult. If working a 40 hour week, an individual would expect to make $1,416.00 fortnightly (before tax). In comparison, the 2018 New Zealand Living Wage rate is $21.15 an hour. If working a 40 hour week, an individual would expect to make $1,692 fortnightly (before tax).
Lets look at rental prices in our three main centers, Auckland, Wellington, and Christchurch.
For 1-2 bedroom houses the median weekly rent in September 2018 was:
For this exercise we are going to take these figures as actual rents, and the figures below as actual costs, and lets see if someone living on NZ Super could afford to live:
- By looking at rents alone, a single person living alone would get $822.30 (a fortnight after tax at ‘M’ tax code) for superannuation, and would only be able to afford to rent a 1-2 bedroom house in Christchurch.
- If you have a partner, and you both meet the criteria for NZ Super, you will receive a total of $632.54 each a fortnight (after tax at ‘M’ tax code). You would both be able to afford the median weekly rent in Auckland, Wellington and Christchurch, but would you be able to afford to “live”?
Average weekly food costs for an individual adult on a basic diet in 2018 are:
Average spend on non-food items weekly is $25.60
- You would still be able to afford to rent and buy basic groceries living as an individual in Christchurch, and a couple in Auckland, Wellington, and Christchurch.
Average weekly cost for electricity/gas (as per 2016 StatsNZ data) is:
- You can still afford power on NZ Super living as a couple in Auckland, Wellington, and Christchurch. But could you afford anything else?
Average spend on contents insurance
An insurance provider offers renters insurance that will cover $10,000 worth of cover fir the first 12 months of the plan for $26. We can assume that this will probably be at the lower end of the price range.
- You can still afford contents insurance on NZ Super living as a couple in Auckland, Wellington, and Christchurch.
Average weekly spend for communication (internet, phone plan etc.) is $22.00
- You could still afford communication costs if you lived in Auckland, Wellington and Christchurch
Average spend on health per week is $36.10
- You could not afford the average weekly spend on health if you live in Auckland and Wellington, but you still could in Christchurch.
Average weekly spend of Miscellaneous goods & services (Salon, other insurance etc.) is $64.40
- You would be able to afford miscellaneous goods & services if you lived in Christchurch
Average weekly spend of transport (car ownership etc.) is $102.40 but could be dramatically reduced if public transport is used.
- However, you would not be able to afford to also own a car as well as rent in Christchurch. Nor any extra clothing, recreation, household contents and other expenditures.
Although the figures stated above may not be accurate to your situation (there are many ways to cut costs), especially if you do not live in a main center, it is simple to see that it would be difficult to rent and live comfortably on NZ Super alone.