Price increases for retirees but more Australians set to have a comfortable lifestyle in retirement in the future

The ASFA Retirement Standard June quarter 2022 figures indicate that couples aged around 65 living a comfortable retirement need to spend $66,725 per year and singles $47,383, up by 2.0 per cent and 1.9 per cent respectively on the previous quarter.

Over the year to June 2022 prices were up by around 6.2 per cent for the comfortable couple budget and by 6.7 per cent for the comfortable single budget.

The percentage increases in the budgets for those aged around 65 were slightly higher than the quarterly increase in the June quarter All Groups CPI of 1.8 per cent, and the annual change of 6.1 per cent.

Retirees have faced significant price increases for non-discretionary items such as food, automotive fuel, and health costs.

“Retiree households continue to face ever increasing health costs, with the annual increase in private health insurance applying for 1 April,” said ASFA Deputy CEO, Glen McCrea.

“While there is considerable subsidisation of health costs and benefits being paid from private health insurance, out of pocket expenses remain substantial for items such as dental treatment, optical expenses, and gap payments for procedures in hospitals.

“Private health insurance premiums rose on average by 2.7 % from 1 April with some major insurers increasing premiums by more than 3%.

“However, other insurers have postponed premium increases until later in the year.”

Retirement budgets for those aged around 85 were up by around 0.8 per cent from the previous quarter. The older retiree budgets were not directly affected by the increase in petrol prices, which were significant in the June quarter, as there is no allowance for car ownership for this age group. The over 85 budgets also do not include any overseas travel.

However, while retirees are doing it tough at the moment, the good news is the superannuation system is delivering. This is a result of more retirees having received the benefits of compulsory superannuation over long periods and also the impact of the legislated phased increase in compulsory superannuation to 12 per cent of wages by 2025 (the rate went to 10.5 per cent of wages on 1 July this year).

Recently published Department of Social Services figures indicate that only around 40 per cent of those currently aged between 66 and 70 receive the Age Pension indicating the success of compulsory superannuation in both boosting retirement incomes and containing the Age Pension bill for the government.

“Despite the challenges of recent years, superannuation continues to achieve its objective of materially lifting the standard of living of older Australians and allowing more retirees to achieve the dignity they deserve in retirement,” said Glen McCrea.

Details for the retirement budget price changes (all price changes from the previous quarter except if specifically referred to as annual)

• Fruit and vegetables rose 5.8% due to heavy rainfall and flooding in key production areas. COVID–related supply chain disruptions and high transport and fertiliser costs also contributed to the rise.
• Meals out and take away foods rose 1.4% due to rising input costs and ongoing supply and labour shortages.
• Bread and cereal products rose 3.1% due to constrained global wheat supply.
• Over the past twelve months, the group rose 5.9%. Meals out and take away foods (+4.7%), Fruit and vegetables (+7.3%) and Non–alcoholic beverages (+7.9%) were the main contributors.
• Automotive fuel rose 4.2% due to the oil price shock caused by the Russian invasion of Ukraine, paired with ongoing easing of COVID-19 restrictions strengthening global demand.
• The price of motor vehicles rose 1.2% due to supply constraints restricting global supply chains, coupled with strong domestic demand.
• Furniture rose 7.0% due to increased transport and manufacturing costs. Household appliances, utensils and tools rose 4.0% due to high freight costs.
• Non–durable household products rose 2.3% driven by rises in a range of products including tissues, toilet paper and paper towels, reflecting strong demand and increased freight and inputs costs.
• Garments rose 4.4% due to the pass-through of high freight costs for new season stock.
• Private health insurance premiums rose on average by 2.7 % from 1 April with some major insurers increasing premiums by more than 3%. However, some insurers have postponed premium increases until later in the year.
• Domestic holiday travel and accommodation rose 1.7% due to strong demand.
• International holiday travel and accommodation rose 19.9% due to price rises in tours and airfares. Tours of America and Europe resumed for the first time since 2019, whilst demand for flights, particularly to Europe, exceeds current capacity. Many airfares are now above pre–COVID levels due to low capacity combined with rising jet fuel prices.

The spending categories showing the largest annual price increases were as follows:

• Automotive fuel 32.1%
• Oils and fats 14.0%, Coffee and tea 9.3%, Breakfast cereals 8.8%, Bread 7.2%, Soft drinks 7.6%
• Vegetables 14.6%, Beef 9.4%, Lamb 7.1%, Milk 5.3%
• Furniture 8.5%, Floor coverings 6.9%, Home maintenance 5.9%, Cleaning products 8.0%
• Domestic travel and accommodation 7.8%

Details for the various updated budgets follow.

Table 1: Budgets for various households and living standards for those aged around 65 (June quarter 2022, national)

Household type Single Modest Couple Modest Single Comfortable Couple Comfortable Housing – ongoing only $106.31 $119.39 $124.95 $130.38 Energy $33.96 $45.61 $43.02 $53.35 Food $100.78 $186.85 $130.30 $226.48 Clothing $20.90 $39.72 $27.92 $51.99 Household goods and services $36.58 $42.88 $81.25 $100.04 Health $53.44 $103.26 $109.38 $204.93 Transport $104.42 $111.05 $170.74 $184.76 Leisure $101.78 $159.80 $197.97 $297.45 Communications $17.74 $19.98 $22.18 $28.87 Total per week $575.91 $828.54 $907.71 $1,278.26 Total per year $30,063 $43,250 $47,383 $66,725

 

Table 2: Budgets for various households and living standards for those aged around 85 (June quarter 2022, national)

Household type Single Modest Couple Modest Single Comfortable Couple Comfortable Housing – ongoing only $106.31 $119.39 $124.95 $130.38 Energy $33.96 $45.61 $43.02 $53.35 Food $100.78 $186.85 $130.30 $226.48 Clothing $20.90 $39.72 $27.92 $51.99 Household goods and services $54.05 $77.43 $159.86 $191.49 Health $92.87 $129.72 $153.64 $242.31 Transport $39.09 $48.86 $43.98 $53.75 Leisure $66.00 $94.66 $136.99 $192.03 Communications $17.74 $19.98 $22.18 $28.87 Total per week $531.69 $762.21 $842.84 $1,170.64 Total per year $27,754 $39,788 $43,996 $61,108

 

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. All calculations are weekly, unless otherwise stated. Annual figure is 52.2 times the weekly figure.

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For further information, please contact:
ASFA Media team, 0451 949 300

About the ASFA Retirement Standard

Since 2004 the ASFA Retirement Standard has served as a retirement companion for Australians, providing a reliable retirement savings guide by benchmarking the annual budget needed to fund either a comfortable or modest standard of living in the post-work years. It is updated quarterly to reflect inflation, reviewed regularly to reflect changes in lifestyle, and provides detailed budgets of what single people and couples would need to spend to support their chosen lifestyle.

More information

Costs and summary figures can be accessed via the ASFA website. Australians can find out more about superannuation on the independent Super Guru website.