Own home not substitute for retirement savings, says treasury

By NZPA

Friday 23rd March 2007

A Treasury study of household savings has found that home ownership should not be viewed as a substitute for adequate levels of retirement saving.

Even if households planned to draw down half their housing equity to support retirement income, the impact on the saving rate needed to smooth consumption would be modest, the study released today said.

Based on survey data, the study said 60% of households were recorded as owning a home.

Close to half of property-owning households were outright owners and about half of those with mortgage debt owed under 50% of the property value.

Housing represented a major share of household wealth, and that share had risen in line with the increase in property prices, the study said.

Finance Minister Michael Cullen said the study reinforced the need for most people to start saving for retirement earlier, rather than later in their working life.

Owning a home was a key part of securing people's standard of living in retirement, but should not be relied upon to replace other saving, he said.

Cullen used the release of the report as a chance to plug the KiwiSaver scheme , to be launched in July.

KiwiSaver, by encouraging people to put aside 4% or 8% of their income now, made the savings challenge easier.

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