Australian retirees will need to spend slightly more than this time last year to fund a 'comfortable' and 'modest' standard of living, according to the ASFA Retirement Standard for the December 2012 quarter, released today.
A couple looking to achieve a 'comfortable' retirement will need to spend $56,339 a year, while those seeking a 'modest' retirement lifestyle will need $32,555 a year.
These figures are up by 2.0 per cent and 2.8 per cent respectively on the December quarter 2011 figures of $55,249 and $31,675 a year. In comparison, the increase in the All Groups Consumer Price Index (CPI) was 2.2 per cent over the year.
The costs of retirement did not increase significantly between the September and December quarters 2012, up 0.3 per cent at the comfortable level and 0.1 per cent at the modest level (see Table 1 for budget breakdown). This was similar to the 0.2 per cent increase in the All Groups CPI.
There were several contributors to the increase in costs over the quarter. The most significant price rises were for domestic holiday travel and accommodation (6.2 per cent), and automotive fuel (2.6 per cent). These fed into the increase in the retirement budgets, particularly at the comfortable level.
The most significant price falls were for vegetables (-5.7 per cent), audio, visual and computing equipment (-4.3 per cent) and pharmaceutical products (-3.5 per cent).
Overall, costs for food decreased in the December quarter 2012. As noted above, there was a substantial fall in the price of vegetables (-5.7 per cent), mostly due to favourable growing and weather conditions. The fall was partially offset by rises in poultry (6.0 per cent), fruit (1.7 per cent) and cakes and biscuits (1.7 per cent).
There was also a fall in health costs recorded in the quarter. The main contributor was pharmaceutical products (-3.5 per cent), which fell mainly as a result of a greater proportion of consumers exceeding the Pharmaceutical Benefits Scheme safety net compared to the September quarter 2012. Over the long term the underlying trend has been for significant increases in health costs, which has implications for many retirees.
Over the 12 months to the December quarter 2012, the health group rose 7.7 per cent. The main contributors to this rise were medical and hospital services (+9.4 per cent), pharmaceutical products (+5.4 per cent) and dental services (+3.4 per cent).
The cost of leisure activities also increased over the quarter, with the main contributor being a rise in domestic holiday travel and accommodation (6.2 per cent), due mostly to increased accommodation prices during the Christmas and summer school holiday period. This rise was partially offset by falls in audio, visual and computing equipment and international holiday travel and accommodation (-1.2 per cent).
The reason that the increase in the costs of retirement at the modest and comfortable levels differed from the increase in the All Groups CPI is that retiree households on average have somewhat different spending patterns to the rest of the population.
Along with generally owning their own home outright (so cost increases for housing are less important for retirees), they don't tend to spend much on education services.
In contrast, electricity, food, health, transportation and recreation spending form a large part of retiree budgets. The differences in the composition of expenditure in the modest and comfortable budgets mean that a price increase for a specified good or service can impact more on the modest than the comfortable budget, or vice versa. However, over the longer term it is not unusual for the effects of the various differences to largely cancel out.
Table 1: Budgets for various households and living standards (December quarter 2012, national)
||Modest lifestyle - single
||Modest lifestyle - couple
||Comfortable lifestyle - single
||Comfortable lifestyle - couple
|Housing - ongoing only
|Household goods and services
|Total per week
|Total per year
The figures in each case assume that the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. Single calculations are based on female figures. All calculations are weekly unless otherwise stated.
The ASFA Retirement Standard is an initiative of the Association of Superannuation Funds of Australia (ASFA) benchmarking the annual budget needed by Australians to fund either a comfortable or modest standard of living in the post-work years.
It is updated quarterly to reflect inflation and provides detailed budgets of what singles and couples would need to spend to support their chosen lifestyle.
Modest lifestyle in retirement
Better than the Age Pension, but still only able to afford fairly basic activities.
Comfortable retirement lifestyle
Enabling an older, healthy retiree to be involved in a broad range of leisure and recreational activities and to have a good standard of living through the purchase of such things as: household goods; private health insurance; a reasonable car; good clothes; a range of electronic equipment; and domestic, and occasionally international, holiday travel.
Costs and summary figures can be accessed via the ASFA website.
For further information, please contact:
Pauline Vamos, CEO, 0433 169 342
Megan McDougall, Media and Communications Co-ordinator, (02) 8079 0849
ASFA is the peak policy, research and advocacy body for Australia's superannuation industry. It is a not-for-profit, sector-neutral, and non-party political national organisation whose aim is to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.