Divergent Paths: Changes in Public and Private Income Provision amongst Older Households

Vasantha Krishnan

Like other countries New Zealand is experiencing an ageing of its population, the result of lower fertility, increased longevity and annual net emigration. The effects of  an ageing population are significant when looked at in relation to the working-age population (the dependency ratio), which has implications for the public provision of retirement income.

This paper examines several important trends in the changing structure of retirement income provision in New Zealand and their impacts on the elderly in the different income groups. These trends involve the shifting public/private mix of retirement income, the declining replacement rates of public provision, and the increasing vulnerability of older workers in the current labour market.

Thus while income from private sources has grown relative to public provision for older households, this has only occurred in real terms for the top income quintile. Also, the number accessing income support  in the 55 to 64 years age group has grown, creating a larger group of economically vulnerable people in old age.

These trends depict an emerging and accelerating division between older people in the top and bottom income distributions, which will have implications for future public retirement provision.