Where do people live the longest?

11/01/2019

Judith Davey

This sounds like a simple question and it is easy to find plenty of answers, many of them hard to reconcile with each other. The ranking tables of the countries with the highest life expectancy at birth in 2018 vary depending on when the data was derived and what is considered a “country”. For example, among the top ten in one list are tiny states or areas – Monaco, Singapore, Macau, San Marino, Andorra, Hong Kong and Guernsey. Some figures are adjusted for “healthy life expectancy” which estimates years of life in good health.

Some sources imply that all you have to do to live a long life is to move to one of the top places for life expectancy. A pretty naïve conclusion!

Tops for life expectancy at birth (years) appear to be:

1. Japan – 83.8
2. Italy – 83.5
3. Spain – 83.4
4. Switzerland – 83.2
5. Iceland – 82.9
6. France – 82.7
7. Singapore – 82.6

Australia comes 10 on this list at 82.5 years and New Zealand at 24 with 81.5.

But these are figures for average life expectancy at birth, for the total population. The picture is much more complicated than assuming that the average person in the particular country lives to that particular age. Life expectancy at birth is not based on how old the oldest citizens are but takes into account the number of people who die young. Life expectancy at birth reflects public health factors: water and air quality, traffic safety, hospital capacity, lifestyle factors such as smoking and so on.

Life expectancy can vary over time. It dropped in the Russian federation 1971 to 1994 and then rose again. In the USA it is dropping, due to “premature” deaths from factors such as drug use, suicide and crime.

Looking to the future, it is predicted that life expectancy in some Asian countries will overtake those in so-called “western” countries. Life expectancy at birth in China has overtaken that in the USA, and South Korea is likely to become the first country where life expectancy at birth will exceed 90 years, according to a Lancet study. This is probably down to overall improvements in economic status, health care and child nutrition.

So, what can we say about longevity? In these blogs I propose to get away from comparative statistics and look instead at Places, Foods and Actions which are or have been associated with long life.

Another way of looking at this is pinpointing areas which have large numbers of very old people. Four of these appear regularly in the literature:

Abkhazia – is in the Caucasus Mountains in southern Russia and is “partially” recognised as a state. There are some doubts about claims that people in this area are regularly living well over 100 years, in the absence of formal birth records. But the region certainly has high levels of physical and mental fitness among its older people and this has been known since the time of Ancient Greeks. It is a mountainous region, so the inhabitants regularly move up and down high altitudes in thin air. There is no one secret of longevity, but as well as regular exercise the local diet consists, on average, of less than 2000 calories a day, which is very low by “western” standards. It is composed of fresh raw vegetables, nuts and yoghurt. There is no alcohol or smoking and people never retire from work on the land and with their animals. The local older people appear to enjoy being old. It seems that the high quality of their personal relationships is another factor in their high level of wellbeing.

Hunza – is a remote and isolated valley in Pakistan-ruled Kashmir, at 7000 feet above sea-level. It was not well known by outsiders until the late 19th century although the inhabitants claim descent from lost soldiers of Alexander the Great (?). Its culture is unique, and it has been sometimes suggested to be the mythical Shangri-La. Here also there are reported to be large numbers of centenarians and “super-centenarians” (aged 110 plus). Like the Abkhazians, the people grow their own food, have a diet of raw fruit and vegetables, take regular exercise and enjoy good water and air. There is very little stress in their lives.

Vilcabamba – is an isolated area in the high Andes of southern Ecuador. Situated on the equator, the climate is balanced – mild and pleasant all year. The old people of Vilcabamba are certainly in good health and live long lives. They have a low calorie, low- fat diet, with fresh fruit and vegetables, good water and clean air. They work hard but have little stress and old people are valued and treated with respect.

You are beginning to see similarities between these regions, in environment and lifestyle, not to mention a social environment which is good for older people. Nevertheless, in the absence of scientific data it is difficult to be sure exactly how long people live.

Okinawa – an archipelago 360 miles to the south of Japan is different geographically, but it has the world’s highest prevalence of proven centenarians. Okinawan cuisine consists of green and yellow vegetables, fish, rice (smaller meal portions than in mainland Japan) as well as pork, soy and other legumes. Special local foods include the Satsuma sweet potato, the Okinawan bitter melon and seaweed, all low-calorie and known to be beneficial for health. Turmeric is also common in the Okinawan diet – noted throughout history, especially in South Asia for its health benefits, with antioxidant properties and anti-ageing properties

Next time I will look at some of the food items which may contribute to longevity.

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Posted in Longevity | 2 Comments

Loneliness – and the time of year

14/12/2018

Judith Davey

Loneliness and social isolation can threaten the wellbeing of older people. They are particularly vulnerable due to deteriorating physical health, the death of spouses, partners, and friends, being more likely to live alone, and difficulty in getting around. A wide range of health outcomes are associated with loneliness and social isolation including depression, cardiovascular disease, cognitive function and even mortality.

Data on Loneliness

Looking on the bright side – in the New Zealand General Social (GSS) Survey 2016 (the most recent published results) only 15% of people aged 65-74 and 16.5% of those aged 75 or older said that they had felt lonely some, most of all of the time, in previous four weeks. These were lower levels than for people under age 35. Looking at this more positively, 85% did not feel lonely . Perhaps these older people should think of ways to communicate with lonely teenagers this Christmas!

Much of what constitutes “Christmas”, in the popular view, is contact with friends and family. Here again, older people do not do too badly. In the 2016 GSS survey, 70% of people aged 65 plus had face-to-face contact with family and friends at least weekly; and 80% had non-face-to-face contact. This would mean telephone calls, email, video calls and other form of digital communication.

There has been a significant growth in non-face-to-face contact with friends in recent years, for all age groups, probably linked with digital device use. The figures decrease with age – 94% of respondents aged 15-24 said they had non-face-to-face contact with friends in 2016, and over 80% of the 25-44 age groups. The figures for older people were lower, but still significant, 71% for people 65-74 and 66% for those 75 and over.

Do people have enough contact?

People will vary in the amount of contact they need. There are the gregarious and the reclusive. In GSS 2012, 81% of people aged 65-74 said they had enough contact with family and 84% of those 75 plus. In the same survey, 87% of people aged 65-74 said they had enough contact with friends and 86% of those 75 plus. These figures were higher than for any other age group. So it seems that most older people are happy with the amount of contact they have.

Overall Life Satisfaction

Perhaps we can sum up the situation by looking at information on Overall Life Satisfaction. In every GSS survey since 2008 the percentages in the “very satisfied” category have increased for the older age groups and are higher than for younger people. In 2016-17 three out of every four people aged 65 plus indicated 8 or more on a scale there 0 is completely dissatisfied and 10 is completely satisfied.
But although this information suggests that the majority of older people in NZ do not describe themselves as lonely, have regular contact with family and friends and are satisfied with the extent of this contact, we must not forget the minority who suffer from social isolation and loneliness.

What can be done about it?

There are a variety of “interventions” designed to combat loneliness and social isolation among older people .

Social facilitation interventions are designed to promote social interaction on the basis of mutual benefit to participants. Many are group-based activities, such as friendship clubs, shared interest groups, and day care centres.

Psychological therapies may also be group activities facilitate by trained therapists. They involve cognitive and social support interventions – such as humour and reminiscence.

Health and social care provision activities often involve health and social care professionals and may take place either in the community or in residential care. The “Eden alternative” is an example of the latter.

Animal interventions. Pets can provide social support and companionship. Evaluations have shown that both a robotic dog and a living dog could help reduce loneliness, but there was a higher level of attachment to a living animal, as one would expect.

Befriending interventions. Age Concern’s Accredited Visitors scheme is an example, providing one-to-one support for lonely people, by volunteers. Telephone projects can also generate a sense of belonging and ‘knowing there’s a friend out there’

Leisure/skill development interventions. These can include gardening programmes (indoor gardening programmes for rest home residents), computer/internet use, holidays and sports. Productive activities (e.g. reading or engaging in hobbies) have been shown to reduce loneliness, while passive activities (such as watching TV or listening to radio) do not.

What makes interventions successful?

Three common characteristics of effective interventions to combat loneliness are –

• Being adapted to a local context;
• Having service users involved in their design and implementation;
• Involving productive engagement rather than passive activities.

But a key underlying factor will always be the individual’s own social network, which brings us back to the figures which I set out above.

All of this can come to the fore at a time of year when the joys of social interaction are emphasised (probably too much given all the commercial hype about Christmas which is being heaped upon us). As the Minister for Seniors says in her recent newsletter –

If you’re anything like me, you’ll now be looking forward to spending some time with your families, and I hope, having a relaxing Christmas.


[1] This does not mean that loneliness among younger people is of no concern.

[2] This information is not available for the last two GSS surveys.

[3] Clare Gardiner, Gideon Geldenhuys and Merryn Gott (2018) Interventions to reduce social isolation and loneliness among older people: an integrative review. Health and Social Care in the Community, Vol.26, 2, pages 147-157.

 

Posted in Uncategorized | 2 Comments

What is loneliness and how can it be measured?

Judith Davey

30/11/2018

Loneliness as a social issue has come to the fore recently and much has been made of moves by governments to put it on the policy agenda. Prime Minister Theresa May’s announcement in January this year that a Minister for Loneliness had been appointed in Britain was seen as a significant step forward.

What has not been highlighted is that the said minister – Tracey Crouch – also held ministerial briefs for charities, social enterprise, sport, gambling and lotteries, which cannot have given her much time for her new responsibility. She resigned on November 1st and was replaced by Miriam (Mims) Davies on November 6th. The new minister also has multiple portfolios.

Getting back to the definition of loneliness. As I mentioned in an earlier blog (January 2015), loneliness and social isolation have been as associated by sociologists with living alone, with psychiatric disorder and antisocial behaviour. But this cannot be the whole story. Many people choose to live alone, and this can be a sign of individualism, independence, and/or wealth. It has become a viable lifestyle. Loneliness is something much more complex.

The upsurge of interest in loneliness in the 21st century can be related to social change – as well as growing numbers of people living alone, there is the fragmentation of families, population ageing, high workforce participation by women and the growth of Internet use, at home and at work.

Loneliness is an invisible condition. It cannot be observed or clinically assessed. Every person’s experience of loneliness is unique. People have to perceive themselves as lonely for it to be measured. Often it is not disclosed, because it is stigmatised in many cultures. As well as being difficult to define, it is hard to measure and may be intermittent.

Loneliness comes in many different forms and can arise from a mixture of social, cultural and situational factors. Living in a very competitive society can make under-achievers feel alienated and lonely. It is related to both close personal relationship and also integration into wider society. Both seem to be necessary to protect from loneliness.

There are mixed feelings about the effect that the Internet has on social relationships and hence loneliness. Is it a positive or a negative? It can encourage contacts but takes away face-to-face relationships. Internet links do not end with a handshake, a kiss or a hug.

No wonder being a Minister for Loneliness is a challenging job!

There have been many attempts to measure loneliness. The Campaign to End Loneliness, based in Britain, suggests four loneliness scales which can be used in community-based research, evaluating their strengths and weaknesses.

The UCLA Loneliness Scale
This was developed at the University of California. First published in 1978, it has been revised several times. The scale is widely used in the scientific literature, including New Zealand research (see Horizon Research data in my next blog).

There are 3 questions:

1. How often do you feel that you lack companionship?
2. How often do you feel left out?
3. How often do you feel isolated from others?

The scale generally uses three response categories: hardly ever / some of the time / often. The questions can be difficult to ask older people (I know from personal experience).

The De Jong Gierveld Loneliness Scale
This scale has been widely used in Europe and translated into several languages. It is designed for use with older people. Its six items cover emotional loneliness (missing intimate relationships) and social loneliness (missing a wider social network). The items are:

1. I experience a general sense of emptiness
2. I miss having people around me
3. I often feel rejected
4. There are plenty of people I can rely on when I have problems
5. There are many people I can trust completely
6. There are enough people I feel close to

The scale generally uses three response categories: yes/more or less/no. Or an agree/disagree scale.

Again, it doesn’t mention loneliness, but has tricky, negatively-worded and somewhat ambiguous propositions.

Single-item scales
These ask directly how lonely individuals feel. For example, they may ask:

Are you:
• Very lonely?
• Lonely at times?
• Never lonely?

The New Zealand General Social Survey (GSS) asks, “In the last four weeks, how much of the time have you felt lonely?” (There will be data from this in my next blog) The possible answers – on a show-card – are:

1. None of the time
2. A little of the time
3. Some of the time
4. Most of the time
5. All of the time

These scales go directly to the issue of interest and are easy to administer. But they may be too blunt and don’t pick up gradations of loneliness, or its duration.

The Campaign to End Loneliness Measurement Tool
The campaign’s own scale contains 3 statements:

1. I am content with my friendships and relationships
2. I have enough people I feel comfortable asking for help at any time
3. My relationships are as satisfying as I would want them to be.

It asks respondents to answer: strongly disagree/disagree/neutral/agree/strongly agree/don’t know.

This also doesn’t mention loneliness and is framed positively. It is a practical resource for use in face-to-face work with older people.

I welcome comments on these approaches to measuring loneliness.


Morrison, P.S. and Smith, R. (2018) Loneliness: An Overview. In Narratives of Loneliness. Sagan, O. and Miller, E.D. (Eds), Routledge, London and New York.

Posted in Risks-loneliness and social isolation, EAN, discrimination | 2 Comments

What is Active Ageing? And is it a “good thing”

Judith Davey

16/11/2018

A variety of terms is bandied about when people try to put a positive slant on population ageing, what it means and its implications. We hear about “healthy” “positive”, “successful”, “productive”, “active ageing and so on. The one I like best is active ageing. But what does it mean? And, if it is a good thing, what can be done to make it a reality?

The ‘Active Aging’ concept emerged during the International Year of Older Persons (1999). The concept brings together aspects of health, participation, and independence, recognising the knowledge and wisdom which older people can contribute if they are given opportunities to participate and hence to remain active . One way it has been applied in practice has been the Age-Friendly Cities and Communities movement, which I have talked about in earlier blogs. The Age-Friendly movement is linked with active citizenship – another aspect of active ageing.

I like the definition of Active Aging given by the European Commission (2018) – ‘helping people stay in charge of their own lives for as long as possible as they age, and, where possible, to contribute to the economy and society’. A shorter definition is “ageing well”, which is the title of the National Science Challenge research programme, which started in 2013 and is now well under way.

All these phrases are intended to counteract the “deficit” model of ageing, which implies inevitable and uncorrected physical and mental decline with age. This goes alongside my bugbear – ‘retirement” as a negative term for later life.

The more active view of ageing fits well with the outlook of the generations which are now entering later life (however we want to define it in terms of age). The epithet of “baby boomers” is too stereotypical – they are not all the same. But , on average, they are better educated than any other preceding generations. Many have fought against racism, homophobia, and authoritarianism, and championed women’s rights, citizen empowerment, and sexual freedom. Even if they have not fought, they have felt the effects of fundamental social and economic change.

So, what is needed to promote Active Ageing?

Active Aging was defined by the World Health Organisation (WHO) as “the process of optimizing opportunities for physical, social, and mental well-being throughout the life course” i.e. developing the full potential of individuals of all ages. This must entail a very wide scope of action. If the emphasis is only on one aspect of life, such as health (Healthy Ageing) or economic participation (Productive Ageing), as has been the case in some policy initiatives, there is the danger of stereotypes, and prejudices about ageing and older people.

A successful strategy to promote Active Ageing needs to bring together wider domains, including wellbeing, social participation and citizenship. Its aims should be to promote lifelong learning, working longer, “retiring” later, and continuing to be active in later life, engaging in activities to promote skills and maintain health. Preferably this should apply well before “old age” sets in.

But we cannot ignore socio-economic, socio-political, and environmental factors which affect the environment in which people age. Initiatives to promote Active Ageing, in the way I have defined it, should also recognise that achieving this goal is influenced by environmental, economic, cultural, and social conditions which provide opportunities and resources or create barriers for older people. The physical and built environments are of great importance in determining people’s level of (in)dependency. There are also personal determinants – individual biological, psychological, and behavioural conditions of aging people. We often over-generalise about older people, their characteristics and the life experiences.

At the same time, older people themselves can, and should be supported to, play a crucial role in influencing, improving and creating the conditions that favour their ageing process and improve their well-being.

But Active Ageing can be criticised

The Active Ageing model can become coercive, with high expectations and high ideals being placed on older people who may not be able to achieve them because of personal circumstances in terms of health, educational level, or income. The prospect of decline cannot be totally eradicated. Sky-diving at age 99 is not a realistic ideal for all!

An emphasis on remaining economically active may exclude people who are out of the labour force for whatever reason, stigmatising them as ‘non-active’. This devalues the contribution of older people as volunteers and carers and overlooks the aspect of choice – people may prefer not to be in paid work.

The argument is that Active Ageing (in some definitions) may be unattainable for a large group of society, and an emphasis on this approach may contribute to social discrimination and the exclusion of the oldest-old, as well as those vulnerable, fragile, and dependent, who do not meet the criteria in terms of health, independence, productivity, and activity.

So, however much we (and I) like the idea of Active Ageing, we must be careful of how it is defined and brought into policy and practice. It can be a good thing so long as it recognises diversity at the individual and contextual levels.

 


[1] This blog draws on a recent article – Elena del Barrio, Sara Marsillas , Tine Buffel, An-Sofie Smetcoren and Mayte Sancho  (2018) From Active Aging to Active Citizenship: The Role of (Age) Friendliness. Soc. Sci.  Vol.7(8), p.134.

Posted in Other | 2 Comments

What about rental units in retirement villages?

Judith Davey

2/11/2018

I have written before about the prospect that a growing number of older people will be living in rental accommodation in the future – based on a declining trend in home ownership.

Another recent blog was about the growth in retirement villages as a housing option, albeit one which is largely open only to people who have been home owners.

These facts made me wonder about the prospect of retirement villages offering rental accommodation. I enquired of the Retirement Villages Association and, thanks to the Executive Director John Collyns, was told that there are currently 52 villages (members of the RVA), providing 510 rental units in total. About half have less than 10 such units. Both not-for-profit and commercial villages are represented in the list, but the balance is towards the former. Only Oceania, among the top six operators is reported to have rentals. The leaders in the not-for-profit sector are Masonic Villages and Trusts, the Selwyn Foundation and Presbyterian Support/Enliven.

Villages with rental units are spread throughout the country, but their distribution mirrors that of retirement villages in general, with a concentration in Northland, Auckland, Waikato and the Bay of Plenty. Only one in five villages with rentals are in the South Island, mainly in Marlborough and Canterbury.

When I tried to find out more about rental units in villages, starting with those reported as having more than 20 units, I found a surprising lack of information. Mostly this option was not mentioned on their web-sites, even though the RVA data said rentals existed.

I am wondering why.

Is it because the potential demand is growing and could be so high that advertising is not necessary or would raise expectations that cannot be met?

Is there some feeling that renters are somehow “second class” (which is a long-held prejudice in New Zealand)? And that having rented accommodation would somehow detract from the high-life image which many retirement villages try to project?

Is there a question of the financial viability of rental accommodation, especially for villages in the commercial sector which need to make a profit for shareholders? The cost of land and construction is high to cover by reasonable rents. Operators have told the RVA that unless there is a grant or similar benefit from the government or local body, such as access to land, building rentals from scratch is uneconomic.

It certainly appears that the community trusts and charitable organisations are looking more favourably towards incorporating rental options into their offerings. Their mandate is often to house people who are not so well off as the usual RV cohort. Quotes from their web-sites:

“usually for people who are unable financially to provide for their own house purchase.” Aparangi Village in Te Kauwhata.

“Eligibility – Older than 65 years with less than $140 000 in total assets. “
Tamahere Eventide Retirement Village in Hamilton.

Retirement villages in the not-for-profit sector have often received assistance from the public sector or from churches. For example Tamahere Village, with assistance from the state, was able to build a number of quality units and rent them out at a rate less than the average market rental in the Waikato. (It is also a Methodist Church outreach project).

HBH Stevenson Village, Manukau, began as a joint venture between Howick Returned Services Association and Sir William and Lady Stevenson. It is now “a service of Howick Baptist Healthcare”. This village offers low cost rentals for “elderly people on lower incomes. “ Their eligibility criteria -“independent NZ Citizens over 60 years with an emphasis on people who have served the country.”

Several Masonic villages have rental options, including Horowhenua Masonic Village, Levin; Wairarapa Masonic Village, Masterton; Te Awahou Masonic Village, Foxton and Masonic Court, Palmerston North.

“The decision whether buying or renting is best for you depends on your      circumstances. For example, moving into a retirement community may be an interim step or you may wish to retain a capital reserve that will keep on earning for you. If this is the case, renting may be the best option.”

One of the things to bear in mind with religious and welfare organisations is that they have significant tax free advantages by being charities, being able to attract bequests and often not having to pay their trust boards etc. Even so they still don’t seem to be very enthusiastic about getting into the rental space.

This picture is mirrored in Australia. Some traditional retirement villages provide a number of units available for rent. These are limited are not advertised in most cases. Almost all are owned by not- for-profit organisations and they provide the rental units as part of their mission to provide ‘affordable housing’ for the less well off.

There are also single purpose rental villages. These were popular amongst property developers around 1995 to 2005. But virtually none have been built since because of the cost and a low potential return.

There are apparently barriers to the development of rental housing in retirement villages, even though they seem to be a way of extending housing options for older people. If one was looking for such accommodation, it might be a daunting prospect.

Posted in Housing and community environment | 3 Comments

The “precariousness” of older workers

19/10/2018

Judith Davey

The dictionary definition of precariousness is uncertainty, instability, insecurity, dependence on circumstances beyond one’s control. But the term – often with the synonym “precarity” has been used recently to apply in the labour market. Precarity refers to the condition of temporary, flexible, casual and intermittent work leading to economic and social instability. Guy Standing’s book “The Precariat” (published 2011)[1] suggests that there is an emerging class, a growing number of people facing lives of insecurity, moving in and out of jobs that give little meaning to their lives. This trend is linked to labour market reforms that have strengthened management and weakened the bargaining power of employees since the late 1970s. Precarity particularly affects workers in the service sector, youth, women, and immigrants.

But how does this relate to older workers?

A recent paper [2] suggests that older workers may be subject to several types of precariousness, not solely in relation to paid employment; but to other domains of their lives that overlap with work. The authors call this “ontological precarity”[3].

Precarity in the workforce

Older workers may face several forms of insecurity:

  • In order to supplement low pension incomes, older people may take low-level, low income jobs, divorced from their previous careers.
  • The jobs they have to take may lack opportunities for career progression.
  • They may lack access to training and be overlooked in this area.
  • Work intensification and restructuring may mean that the jobs allocated might not be appropriate or sustainable for older people, increasing both physical and psychological pressures.
  • Security from dismissal. When posts are cut, older workers may lose out on jobs. Ageism may especially affect women.
  • Lack of representation through trade unions, etc.

Household circumstances

Household circumstances can reinforce precarity or act as a buffer against it. Older people who are married, own their homes outright, live in dual-earner households, have been  able to save money throughout their lives and who no longer have dependent children are least likely to report reduced ontological security. Being divorced or single, living in a low-income household, having a mortgage to pay off and having dependent children still living at home, can result in heightened ontological precarity.

Financial Circumstances

Financial circumstances can also act to increase or buffer precarity. Male white-collar workers with generous pension entitlements and savings, who own their homes outright or are close to paying off their mortgages, will be relatively financially secure in later life.

Women are less likely to build up significant pension incomes, due to periods of child care-related absences from the labour market and or having been employed in part-time jobs. Low earnings in female-dominated work will also restrict the amount that they had been able to save. However, married women may have some protection from financial precarity in retirement by their husbands’ pension entitlements.

There is a relationship between marital status and housing tenure. Divorced women are less likely to own their homes outright than married men and women living in dual-earner households. Those who had taken out new mortgages in their forties or fifties may find that the continuing need to pay their mortgages requires them to keep on working, however unwillingly. Divorced women may also suffer financially by the loss of access to their husband’s pension savings.

Retirement income policies

Where the age of eligibility for state pensions is raised there may be little realistic alternative to employment. People may like to retire before pension age, but cannot afford to do so with no alternative sources of income.

Unless there is some form of welfare state support before pension age, health pressures may force people to stay on in work, however inappropriate.  This combination of financial and health pressures caused considerable anxiety amongst the people interviewed in the research cited.

Conclusion

Older workers may thus be subject to several sources of uncertainty/precarity. Factors related to jobs, income, marital status and housing can reinforce or buffer each other. Older workers may be making decisions about remaining in the workforce or retiring not from free and controlled choice, but based on labour market and/or housing circumstances and policy settings around retirement incomes.  These influences may drive them out of the workforce to avoid stress or force them into a new role that they did not actually wish to undertake, or did not view as suitable for them.


[1] A New Zealand offering in “Precarity: Uncertain, Insecure and Unequal Lives in Aotearoa New Zealand” Edited by Shiloh Groot, Natasha Tassell Matamua, and Bridgette Masters-Awatere,  Massey University Press,  published 2017.

[2] Lain D, Airey L, Loretto W, Vickerstaff S (2018). Understanding older worker precarity: the intersecting domains of jobs, households and the welfare state. Ageing & Society 1–23. 3.

[3]  A metaphysical term which relates to existence – presumably a wide view of existence.

Posted in Paid and unpaid work (includes volunteering) | 1 Comment

The Retirement Income ‘Eco-system’ 2. Decumulation/Self-Funding

Judith Davey

5/10/2018

It has always been possible for people to contribute to their retirement incomes from their own resources – from earnings, savings and investments and by running down these assets – a process known as decumulation – assuming that such assets are available.

Many people die with money in the bank. This may reflect intentional bequest motives, “rainy day” nest eggs (forgive mixed metaphor), conservatism, insufficient knowledge of decumulation options, premature death or inertia. Attitudes towards bequeathing are important. But with increased longevity, those receiving bequests may well be into their 60s – a way of funding the next generation’s retirement lump sums? The fall in home ownership will, of course, reduce the availability of funds to be passed on. Inheritances can be a way of funding later life health and residential care costs (covered in the previous blog).

There are numerous options for decumulation, with the possibility that people will use several methods:

• Invest KS lump sums and other savings, using the returns for current income needs, and leaving the capital for a “rainy-day”, or bequest.

• Draw down capital and accumulated interest regularly, based on a target income, which can be altered if circumstances change.

• Trade-down to smaller/less expensive housing, which may be more suitable for later life; or move into a retirement village where greater certainty about housing costs is offset by a significant charge on capital and limited options to move on to other housing.

• Commercial equity release schemes, mainly in the form of reverse mortgages with compounding interest on released capital loans, are further options. This also means a much reduced ability to move house and loans must be repaid on the client’s death or move into residential care.

• Commercial annuities. A private sector life annuity market is not well developed in New Zealand as providers face uncertainties about how long people will live and therefore their profits. Regular annuity payments may also affect benefit eligibility (Accommodation Supplement and the Residential Care Subsidy). New products, such as deferred and variable annuities, may be coming along, and a recently launched product – Lifetime Retirement Income – offers a tax paid fortnightly income for all of the investor’s life, based on returns from an initial invested sum.

Given the need to achieve an adequate income in retirement by supplementing New Zealand Superannuation (NZS), and the growing pressure on government support, decumulation may become a more important part of the policy mix.

Prolonging working lives
Earning income after the age of 65 will help to supplement NZS and increase retirement income. This is a growing trend. It has resulted from better health, interest in work, the need for social contact and stimulation and also serves an economic purpose by helping to ease labour and skills shortages. It will also raise the tax base and improve the affordability of NZS.

There is no work-test for NZS and no compulsory retirement, so current policy settings encourage working longer. Increased flexibility of employment, both part-time and part-week, would also make it easier to “work longer,” along with improved capability by employers to manage an ageing workforce.

Homeownership
NZS settings were developed on the assumption that a high proportion of retired New Zealanders would be home-owners, which is still the case. Mortgage-free homeownership results in relatively low housing-related expenditures. So this is a way of pre-funding some retirement accommodation costs – offset by the payment of rates, insurance, repairs and maintenance expenditures.

But home ownership rates have been declining for all age groups, falling from a peak of 73.5% in 1986 to 65% in 2013, with projections of further decreases, which will work their way up the age groups. A Department of Building and Housing report predicts that, by 2051, 21% of households where the reference person is 65 years old or older will be living in rented accommodation. This will have an impact on the adequacy of NZS.

And so…..?
Evidence suggests that NZS is sufficient to provide a minimum standard of living, but any reduction of support in this or in other areas (health, housing subsidies) may result in increases in income poverty among older people, especially older renters.

The maturing of Kiwi Saver (KS) accounts and other savings, and income flows from decumulation, have the potential to contribute significantly to a comfortable standard of living in retirement. However, people on low incomes, with few assets or savings, will still rely on NZS. And for people already close to retirement there may be insufficient time to accumulate a substantial KS fund to draw on.

By OECD standards, New Zealand spends a low proportion of its GDP on pensions, mainly because of flat-rate NZS compared to earnings-related pensions overseas. In 2015, this was 5.1% of GDP as opposed to 8.2% for the OECD overall. There are many other legitimate claims on government spending, ranging from poverty relief for working-age families, education, affordable housing, mental health services, tax cuts, etc. Easing of the “burden” of NZS, perhaps with the maturity of Kiwi Saver accounts, may open up resources for reallocation.

As well as financial considerations, looking at retirement income policies highlights the importance of social and behavioural issues. What about intergenerational equity and fairness between age groups in terms of what they contribute and what they get? Rising expectations of lifestyles and access to services are often attributed to the baby boom generation. I have suggested the need for savings and decumulation and probably a higher degree of self-funding. But deeply ingrained in NZ society are feelings of entitlement to government support and a historic preference for home ownership over renting. The political implications of any drastic changes are very clear.

I believe that the debate about retirement income policies at the public level needs to be widened, as suggested by the Commission for Financial Capability, with better understanding of inter-connecting policies, personal and political trade-offs.

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