Why renting retirees might be better to save nothing if they don't have $200,000
New Zealand retirees with savings under $200,000 may be financially disadvantaged due to strict asset limits on the accommodation supplement. Economists suggest the current system creates a 'cliff' effect that discourages personal savings and requires a redesign.
Why it matters
It highlights systemic flaws in social welfare policy that can inadvertently penalize middle-class retirees for having modest savings.
New Zealand's current settings mean renting retirees who do not have at least $200,000 saved may be better off to have nothing.
The accommodation supplement is available to help with housing costs for people on lower incomes, but it requires that single people only have assets of $8100.
Couples or sole parents can have $16,200. This asset limit has not changed in the time the supplement has been in place.
The amount available as a weekly payment depends on the area that a person lives in and whether they have children.
A couple without children can access up to $235 in the highest payment area.
Simplicity chief economist Shamubeel Eaqub calculated that a renter would need to have about $200,000 saved to generate sufficient money to replace that, assuming the money was drawn down over 25 years.
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