Media Releases

16 December 2015

Modest increase in cost of living for retirees: ASFA Retirement Standard September quarter

The Association of Superannuation Funds of Australia (ASFA) Retirement Standard September quarter figures indicate a modest rise in the cost of living for retirees, with couples aged around 65 living a comfortable retirement needing to spend $58,915 per year and singles $42,962, both 0.2 per cent increases on the previous quarter. Total budgets for older retirees also increased by 0.2 per cent at both the comfortable and modest levels.

"The lack of a substantial increase in the cost of retirement over the most recent quarter is good news for retirees but the sums required are still higher than average balances, and saving enough to meet these costs may be challenging for those that are yet to retire," explained Pauline Vamos, chief executive officer, ASFA.

"In order to achieve a comfortable standard of living in retirement, an individual requires a minimum of around $545,000 and a couple around $645,000. Saving an adequate amount for retirement is likely to get harder rather than easier in the future as governments respond to the ageing population by looking for ways for individuals to make greater private contributions to health and aged care.

"Surveys of the population show that most persons who have not yet retired want to achieve at least the ASFA comfortable level of lifestyle in retirement. Currently, only about 20 per cent of retirees reach that living standard but if there is an increase in the Superannuation Guarantee to at least 12 per cent of wages and we see further voluntary savings by individuals, it should be possible for 50 per cent or more to reach that level."

Ms Vamos also indicated that it was essential that the impact on final retirement outcomes be considered in any changes to the taxation of superannuation: "We should not mortgage the future living standards of retirees in order to deal with short term budget challenges of governments".

The most significant price rises in the September quarter contributing to the increase in the annual budgets were international holiday travel and accommodation (+4.6 per cent), fruit (+8.2 per cent) and property rates and charges (+4.6 per cent). The most significant offsetting price falls were vegetables (-5.9 per cent), telecommunication equipment and services (-2.0 per cent) and automotive fuel (-1.7 per cent).

There also were price rises for health services, namely pharmaceutical products (+0.7 per cent) and medical and hospital services (+0.2 per cent). The rise in pharmaceutical products was due to changes introduced under the Pharmaceutical Benefits Scheme Access and Sustainability Package. The rise was partially offset by a fall in therapeutic appliances and equipment (-1.7 per cent). Over the last 12 months, the health group as a whole rose 4.8 per cent, with the main contributor to the rise being medical and hospital services (+6.6 per cent).

The main contributors to the rise in the housing group were property rates and charges (+4.6 per cent). Rate increases typically occur annually in the September quarter.

There was a fall in the price of electricity (-1.4 per cent) following the Australian Energy Regulator's decision to lower the network charges for electricity distribution across a number of states and territories.

Over the last 12 months, the recreation and culture group rose 1.1 per cent. The main contributors to the rise were other recreational, sporting and cultural services (+5.7 per cent) and domestic holiday travel and accommodation (+2.6 per cent).

The main contributor to the fall in the communication group this quarter was telecommunication equipment and services (-2.0 per cent). Over the last 12 months, the communication group fell 4.1 per cent.

"A useful thing you can do is get in touch with your superannuation fund to find out what options are available to you, so that you have the best chance of living your post-work years free from major financial worries," Ms Vamos concluded.

Table 1: Budgets for various households and living standards for those aged around 65 (September quarter 2015, national)

  Modest lifestyle Comfortable lifestyle
  Single Couple Single Couple
Housing - ongoing only $71.63 $68.76 $83.02 $96.24
Energy $41.04 $54.51 $41.65 $56.48
Food $77.20 $159.92 $110.29 $198.52
Clothing $17.49 $28.39 $37.86 $56.78
Household goods and services $27.04 $36.67 $76.07 $89.11
Health $42.58 $82.18 $84.48 $149.11
Transport $93.92 $96.58 $139.96 $142.62
Leisure $74.58 $111.11 $226.01 $309.72
Communications $8.95 $15.67 $24.60 $31.31
Total per week $454.43 $653.78 $823.92 $1,129.88
Total per year $23,695 $34,090 $42,962 $58,915

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 and living standards for those aged around 85 (September quarter 2015, national)

  Modest lifestyle Comfortable lifestyle
  Single Couple Single Couple
Housing - ongoing only $71.63 $68.76 $83.02 $96.24
Energy $41.04 $54.51 $41.65 $56.48
Food $77.20 $159.92 $110.29 $198.52
Clothing $17.49 $28.40 $37.86 $56.78
Household goods and services $47.48 $67.31 $147.58 $170.83
Health $91.98 $142.79 $125.96 $200.95
Transport $39.07 $48.84 $43.96 $53.72
Leisure $47.51 $70.89 $122.82 $169.77
Communications $8.90 $15.58 $24.45 $31.12
Total per week $442.29 $656.97 $737.58 $1,034.41
Total per year $23,062 $34,257 $38,460 $53,937

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.

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. Australians can find out more about superannuation on the independent Super Guru website.