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Rising energy and healthcare costs place pressure on retiree’s budgets: ASFA Retirement Standard – annual data

Media Release 20 September 2013

20 September 2013

Rising energy and healthcare costs place pressure on retiree’s budgets: ASFA Retirement Standard – annual data

Healthcare and energy costs are placing increased pressure on retiree’s budgets, according to new research released today by the Association of Superannuation Funds of Australia (ASFA).

An analysis of year-on-year figures from the ASFA Retirement Standard reveals energy costs rose by around 17 per cent over the year, contributing to a rise of close to 30 per cent over the past two years.

Healthcare costs also rose substantially over the 12 months to the 2013 June quarter, jumping 6.6 per cent, largely connected to a rise in medical and hospital services (+9.9 per cent) and largely connected to increases in health insurance premiums, which were effective from 1 April 2013.

Overall, the cost of living rose by 2.9 per cent for the ‘modest’ category of expenditure and 2.1 per cent for expenditure falling within the ‘comfortable’ standard of retirement. In contrast, the increase in the All Groups CPI was 2.4 per cent over the year.

Acting ASFA CEO Ross Clare says the research confirms that retirees on lower incomes are facing cost increases which place greater pressure on their budgets than for the community generally.

“It’s important that policymakers are aware of the cost-of-living pressures Australia’s retirees face and consider policies that alleviate the burden of such items on their budgets.”

According to Mr Clare, the research also highlights the importance of saving now to prepare for the lifestyle you want in retirement. ASFA calculations indicate that a single person will need around $430,000 in today’s dollars to fund a ‘comfortable’ standard of living1.

“This means a person currently aged 30, who is earning $50,000 a year and who has a current superannuation balance of $10,000, would have to contribute an additional 3 per cent of their wage as salary sacrifice contributions to reach the level of retirement savings required for a comfortable standard of living in retirement, even taking into account the increase in compulsory contributions to 12 per cent of wages that is currently being phased in,” Mr Clare says.

“For a person currently aged 50, who is earning $100,000 a year and who has a current superannuation balance of $150,000, they would still have to contribute an additional 1 per cent of their wage as salary sacrifice contributions to reach the level of retirement savings required for a ‘comfortable’ standard of living in retirement.”

The Retirement Projector calculator on ASFA’s Super Guru website allows an individual to calculate whether they are on track for a comfortable standard of living in retirement or whether extra contributions to superannuation are required to achieve that.

“Even just a few extra dollars per week can add thousands of dollars to your superannuation balance in retirement, so start planning now for how you can achieve the lifestyle you want in your post-work years,” Mr Clare concluded.

1Assuming receipt of part Age Pension and eventually full Age Pension over the period they are aged between age 65 and age 90.

Table 1: Budgets for various households – Modest lifestyle June 2012/2013 comparison, national

  Modest lifestyle – single Modest lifestyle – couple
  2012 2013 2012 2013
Housing – ongoing only $58.82 $61.88 $56.46 $59.40
(+5.2%) (+5.2%)
Energy $35.08 $41.14 $46.59 $54.64
(+17.2%) (+17.2%)
Food $73.49 $74.31 $152.23 $153.92
(+1.1%) (+1.1%)
Clothing $18.02 $17.96 $29.29 $29.15
(-0.3%) (-0.5%)
Household goods and services $26.10 $26.21 $35.50 $35.54
(+0.4%) (+0.1%)
Health $36.38 $38.80 $70.22 $74.89
(+6.6%) (+6.6%)
Transport $94.00 $93.64 $96.74 $96.29
(-0.4%) (-0.5%)
Leisure $71.05 $71.04 $105.86 $105.83
(-0.01%) (-0.03%)
Communications $9.29 $9.49 $16.26 $16.61
(+2.2%) (+2.2%)
Total per week $422.38 $434.46 $609.10 $626.27
(+2.9%) (+2.8%)
TOTAL PER YEAR $22,024 $22,654 $31,760 $32,656
  (+2.9%) (+2.8%)

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.

Table 2: Budgets for various households – Comfortable lifestyle June 2012/2013 comparison, national

  Comfortable lifestyle – single Comfortable lifestyle – couple
  2012 2013 2012 2013
Housing – ongoing only $68.17 $71.72 $79.02 $83.14
(+5.2%) (+5.2%)
Energy $35.60 $41.75 $48.28 $56.62
(+17.3%) (+17.3%)
Food $104.98 $106.15 $188.97 $191.07
(+1.1%) (+1.1%)
Clothing $39.00 $38.87 $58.50 $58.30
(-0.3%) (-0.3%)
Household goods and services $73.65 $73.73 $86.27 $86.37
(+0.1%) (+0.1%)
Health $72.18 $76.98 $127.40 $135.87
(+6.6%) (+6.6%)
Transport $140.19 $139.54 $142.86 $142.20
(-0.4%) (-0.5%)
Leisure $215.32 $215.27 $295.08 $295.00
(-0.02%) (-0.03%)
Communications $25.53 $26.08 $32.49 $33.19
(+2.2%) (+2.2%)
Total per week $774.63 $790.08 $1,058.87 $1,081.76
(+2.0%) (+2.2%)
TOTAL PER YEAR $40,391 $41,197 $55,213 $56,406
  (+2.0%) (+2.2%)

Differences between the modest and comfortable standards of living in retirement

There are significant differences between the modest and comfortable Retirement Standards. The comfortable budget provides for expenditure, which, while better than that supported by the Age Pension alone, still only provides for fairly basic activities.

The budgets at the comfortable level enable a retiree to purchase more and better goods and services. The comfortable budget allows for:

  • more expenditure on home repairs and the occasional upgrade of a bathroom or kitchen
  • substantially more expenditure on food, with better quality and quantity and more meals out
  • more and better household and personal services, including more expenditure on cosmetic and personal care items and hairdressing for females. The comfortable budget also provides for more and better home appliances and payment for pest control and alarm services
  • significantly higher expenditure on clothes
  • a better car and more petrol for more kilometres travelled
  • greater expenditure on health related expenses, including gap payments for medical and surgical procedures
  • club memberships, more trips to the cinema and day excursions, better domestic holidays and an occasional overseas holiday.

More information

Costs and summary figures can be accessed via the ASFA website. The ASFA Retirement Standard Calculator can be used to obtain a breakdown of the Retirement Standard budgets for each state.

For further information, please contact:

Lisa Chikarovski, Media Manager, 0451 949 300

About ASFA

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.

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