Data on the financial capabilities of disabled New Zealanders

01 February 2023

In February 2023, Te Ara Ahunga Ora - the Retirement Commission released their focus report on the financial capability of New Zealanders with disabilities or long-term health conditions (PDF link) external URL . It contains data showing that disabled people continue to have, on average, lower levels of economic security and income. It also shows that they can find themselves in a negative feedback loop in which they engage in financial behaviours and hold beliefs that hinder rather than help them achieve the stability they seek. In particular, the Commission found the overuse of credit cards and access to unsecured loans are areas in which the government could provide guidance for agencies and mitigating measures to protect disabled people.

You can request accessible formats of this article by emailing contact@whaikaha.govt.nz.

The Office for Disability Issues (ODI) - part of Whaikaha, made a commitment in the 2016 Disability Strategy to improve the availability of disability data. When the strategy was developed in 2015, there was very limited data available. Since that time, the situation is better, because the strategy has stimulated more government agencies to collect quantitative survey data about disabled people and their experiences.

This report is an example of new data that is available on outcomes for disabled people, specifically economic wellbeing.

Outcome 2 of the New Zealand Disability Strategy focuses on different ways that disabled people would like to achieve their economic goals:

2.1 Disabled people and their whānau have economic security
2.2 Disabled people have equitable access to employment
2.3 Disabled people are satisfied with their employment situation
2.4 Disabled people have equitable levels of income

Agencies that have the opportunity to directly effect changes to disabled people's financial capability include the Ministry of Social Development and the Ministry of Business, Innovation and Employment. Improvement in other outcome areas, for instance in education and accessibility, could also indirectly produce changes in economic wellbeing.

Methodology

This is a subset of the 3,027 adults who completed the New Zealand Financial Capability Survey in February and March 2021. Of these, 990 people self-reported a disability or long-term health condition (33 percent of the sample). The survey looks at 21 different areas on a scale from 0 to 100, covering financial behaviours, financial knowledge and experience, psychological factors, and financial wellbeing (outcome) measures. The report states several important caveats:

Disability-specific expenses related to accessibility and health were not considered as factors to be accounted for when comparing financial wellbeing between disabled and non-disabled people.
Differences in financial wellbeing or literacy were not compared among those with ACC coverage vs those with a disability that did not stem from an accident.
Disability specific-financial literacy or what knowledge disabled people need to obtain support for which they are eligible was not explored.
Individual agency in making financial decisions was not considered, including support required or ability to make purchases independently.
Accessibility of financial services and products as a potential barrier for disabled people’s financial literacy was not considered.

Key findings

Lower financial wellbeing among disabled people

After accounting for the effects of age, income and ethnicity, the financial wellbeing of disabled people and people with long-term health conditions is significantly lower than that of non-disabled people. Disabled people score 13 percentage points less than non-disabled when it comes to their self-reported ability to meet financial commitments.

Compared to non-disabled people, disabled people said they have:

lower income (35 percent reported a benefit as main income vs 11 percent for non-disabled), with the largest differences between groups as below:
- 43 percent reported an income under $30,000 compared to 25 percent of non-disabled in the 35-54 years of age group
- 63 percent reported an income under $30,000 compared to 31 percent of non-disabled in the 55-64 years age group
- lower workforce participation rates (59 percent vs 79 percent for non-disabled)
- lower home ownership rates (nearly half as likely to own their home above 55 years of age compared to non-disabled)
- lower rates of participation in KiwiSaver (31 percent have a pension fund including KiwiSaver vs 40 percent of non-disabled; and 42 percent have a balance under $10,000 vs 29 percent of non-disabled).

This data shows that disabled people have fewer opportunities to build their wealth and accumulate assets. As disabled people overall have to spend more than they earn, this lowers their confidence in managing their finances, increases their monitoring of their financial situation, and negatively impacts their ability to borrow.

Disabled people are more likely to access credit cards and unsecured loans:

40 percent have at least one credit card with an outstanding balance vs 26 percent of not disabled.
12 percent have more than four credit cards with an outstanding balance vs two percent of not disabled: this increases to 24 percent for disabled people under 55 years of age.

Behaviour that reduces financial wellbeing

Disabled people tend to engage in the following behaviours which are related to lower financial wellbeing more often than non-disabled people:

spend rather than save (24 percent are overdrawn on their current account most or every month with 38 percent of Māori disabled and 37 percent of Pacific disabled being overdrawn vs 12 percent of non-disabled; and 57 percent have a savings account vs 70 percent of non-disabled)
use credit cards (31 percent agreed they prefer to buy things on credit rather than wait and save vs 25 percent of non-disabled)
borrow for day-to-day expenses (22 percent of disabled people have at least three unsecured loans vs 9 percent of non-disabled).

Lower confidence and control

Disabled people report:

lower financial confidence in managing their money day-to-day (26 percent vs 21 percent for non-disabled, and in planning their financial future (32 percent vs 26 percent of non-disabled people)
lower perceptions of control over their financial situation (32 percent agree their financial situation is largely outside their control vs 16 percent of non-disabled people).

Stronger financial knowledge

The financial difficulties experienced by disabled people mean that they are more likely to have higher scores than non-disabled people for:

informed product choice (43 percent check terms and conditions vs 36 percent of non-disabled)
knowledge of how to compare financial products (84 percent of high-income disabled people have high ratings in their ability to compare insurance conditions vs 68 percent of high-income non-disabled people)
planning income use (45 percent plan exactly how they will use their income vs 33 percent of non-disabled)
keeping track of money (37 percent knew exactly how much money they spent in the last week vs 27 percent of non-disabled).

Compared to non-disabled people with high incomes, disabled people with high incomes give higher ratings about their financial knowledge, like ability to compare financial products such as insurance.

Not all disabled people have low financial literacy, but many are very vulnerable

This report did not closely examine variation among disabled people in financial literacy. There are, within this sample, disabled people who have high income levels and high ratings for financial behaviours, knowledge and confidence.

Nevertheless:

The largest disparities in income between disabled and non-disabled people occurs between 35-64 years of age.
Due to higher prevalence rates of disability among Māori in the sample, twice that of New Zealand European, Māori are more likely to have lower financial wellbeing than non-Māori.