Retirees have experienced a slight increase in the cost of living in the June quarter, according to the Association of Superannuation Funds of Australia (ASFA) Retirement Standard.
The ASFA Retirement Standard June quarter figures indicate that couples aged around 65 living a comfortable retirement needing to spend $59,160 per year and singles $43,062, 0.4 per cent higher for both compared to the previous quarter. Budgets for older retirees (those aged 85 and over) increased by 0.1 per cent. The Consumer Price Index (CPI) rose 0.4 per cent in the June quarter 2016, according to the latest Australian Bureau of Statistics (ABS) figures.
“The small increase in the cost of retirement over recent quarters reflects moderate growth in the overall Consumer Price Index,” explained Jim Minto, interim chief executive officer, ASFA.
“However, saving an adequate amount for retirement is likely to get harder rather than easier as governments respond to the ageing population by looking for ways for individuals to make greater private contributions to health and aged care. Low interest rates and subdued investment earnings more generally will also be factors.”
“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.
“However, less than 20 per cent of single people aged over 65 are able to support a standard of living at or above the ASFA comfortable level and only around 30 per cent of all couples are able to support a standard of living at that level.”
In calculating the lump sums needed ASFA has revised downwards the assumed long term nominal investment return from 7 per cent a year to 6 per cent a year, while at the same time reducing the assumed growth in future community living standards from 3.75 per cent to 2.75 per cent a year, in line with recent subdued average wages growth in Australia.
“ASFA advocates a goal of at least 50 per cent of retirees living at the comfortable standard by 2050. This is not achievable on the basis of current policy settings and individuals’ contributions. It will require individuals to make additional contributions and/or policy enhancements that boost contributions.”
“We encourage people to get in touch with their superannuation fund to find out what options are available, so that they have the best chance of living their post-work years free from major financial worries,” Mr Minto concluded.
The most significant price rises in the June quarter are in medical and hospital services (+4.2 per cent) and automotive fuel (+5.9 per cent). These rises are partially offset by falls in domestic holiday travel and accommodation (–3.7 per cent), motor vehicles (–1.3 per cent) and telecommunication equipment and services (–1.5 per cent).
The increase of 4.2 per cent for medical and hospital services was driven by the annual increase in Private Health Insurance (PHI) premiums, which rise on 1 April every year.
The increase of 5.9 per cent for automotive fuel follows three consecutive quarterly falls, with the rise driven by increases in unleaded, premium and ethanol fuels, as world oil prices increased from a 12-year low last quarter.
The overall CPI rose by only 1.0 per cent through the year to the June quarter 2016. This is the weakest annual rise since the June quarter 1999.
The main contributors to the fall in the food and non-alcoholic beverages group this quarter are snacks and confectionery (-2.9%) and coffee, tea and cocoa (-5.2%). The fall is partially offset by a rise in vegetables (+2.1%). Over the last twelve months, the food and non-alcoholic beverages group fell 0.1%. Falls in fruit (-5.5%) and poultry (-4.9%) are partially offset by rises in beef and veal (+10.9%) and take away and fast foods (+1.9%).
The main contributors to the rise in the clothing and footwear group in the June quarter are garments for women (+1.7%) and footwear for women (+4.5%), due to the introduction of new season stock.
The main contributor to the fall in the recreation and culture group this quarter is domestic holiday travel and accommodation (-3.7%). The fall in domestic holiday travel and accommodation is typical of the off peak season for domestic holiday travel.
ASFA Retirement Standard
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.
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, which aims to advance effective retirement outcomes for members of funds through research, advocacy and the development of policy and industry best practice.