The growing number of New Zealanders who do not own their homes are in for a tough retirement.

This according to a study out of the University of Otago that argues for a revamp of NZ Super to better protect Kiwis who are still tied to a mortgage by the time they stop working.

"We're staring down the barrel of future generations of non-homeowners being less able to achieve acceptable standards of living when they retire because of the critical factor of homeownership," said Dr Helen Roberts of the University of Otago's department of accountancy and finance.

"Essentially, homeowners are in a better financial position in retirement, and we've got fewer people owning homes," Dr Roberts adds.

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Data from CFFC says that while today 70 per cent of people over 65 are mortgage-free, another 13 per cent are homeowners with some mortgage.

This will change as today only 38 per cent of people coming into retirement (55 to 64 year olds) are freehold and another one third still have a mortgage. Nearly one third of this generation don't own a home, compared to 20 per cent of the 65 plus cohort.

Today 14 per cent of seniors rent, that figure is expected to grow to 24 per cent by 2036 according to research last year by the Ageing Well National Science Challenge. And Auckland University's Retirement Policy Research Centre says right now, 41,000 seniors need the accommodation supplement to boost their superannuation.

OneRoof.co.nz editor Owen Vaughan says "this is not what people expect for their retirement."

The Otago University research team consisting of PhD student Jelita Noviarini, and supervisors Dr Andrew Coleman, Dr Roberts and Associate Professor Ros Whiting believe the Government needs to act now to ensure that Kiwis have enough to retire comfortably.

The study found that retirees were increasingly relying on their superannuation to continue paying their mortgages after retirement – and the researchers are concerned about the impact this may have on New Zealand society.

"New Zealand Superannuation is based on the assumption that recipients are homeowners," said Noviarini.

"It's clear through statistics and the current attention on housing affordability that this is becoming less of a reality for many New Zealanders. The longer policymakers take to address this issue, the worse it will be for many New Zealanders."

Among the potential solutions to this problem, the researchers recommend the Government mandate a compulsory contributory retirement savings plan for New Zealanders.

While New Zealanders do have KiwiSaver, it remains voluntary – and those likely to be most in need of additional retirement funds often don't feel they can afford to put aside a percentage of their earnings for the future.

A recent Canstar study revealed that an average salary earner could have over $1.5 million saved in their KiwiSaver fund by retirement if they start young.

Read more:
How the average earner could save $1.5m in KiwiSaver

If Government were to mandate compulsory retirement contributions, this could give future generations a monetary safety net to protect them from relying solely on NZ Super.

OneRoof.co.nz property commentator Ashley Church says another concern is younger people being advised that they shouldn't bother trying to buy their own home.

"It's a highly irresponsible statement to say you should rent, not own," he says. "The long term consequences are disastrous for older people. If you believe this in your 30s and 40s, you are squandering your future. Don't put off buying when you can afford to."

The point here, is the longer you wait, the more likely that you'll end up with a mortgage in your retirement years.

According to the recent Housing Expenditure survey data, New Zealand has approximately 750,000 people aged 65 or over. And with New Zealand's population ageing steadily, these issues are only set to become more pronounced in the coming years.

The study also revealed a racial and socio-economic divide, with some groups having it worse than others.

Māori, renters and individuals living in multi-dwelling occupancies have much lower levels of financial adequacy. In contrast, individuals of Pākehā or Asian ethnicity, homeowners and those living alone benefit more from imputed rent derived through home ownership.