Australian retirees on low incomes are falling behind in the race to support themselves, according to the latest figures from the Association of Superannuation Funds of Australia.

But those enjoying a comfortable retirement are seeing their income needs grow more slowly than the Consumer Price Index and the PBLCI index used to set the Age pension in recent years, meaning they are effectively improving their real incomes.

ASFA regularly publishes standards on the income needs of retirees and they look like this. Couples need $34,855 a year to fund a modest retirement while it is almost $60,000 a year for a comfortable lifestyle.

As the figures show, the costs of living for singles and couples on modest incomes has significantly outstripped CPI costs for the last 10 years. And in the last year, singles have seen their costs rise by more than both the CPI  and PBLCI, while couples in the category have just broken even.

The big drivers of cost of living rises since June 2006 have been power, property rates and food, according to ASFA.

“Over the period (since June 2006) electricity costs increased by 124 per cent, health costs by 60 per cent, property rates and charges by 83 per cent and food costs by 24 per cent,” said Martin Fahy, ASFA CEO.

“The rises in electricity costs are major concern, said Paul Versteege, policy co-ordinator with the Combined Pensioners and Superannuants Association of NSW.

Ross Clare, ASFA’s research director, told The New Daily that while costs of owning property had increased strongly, retirees in the private rental market “need a far larger amount of money in retirement than those owning a home.”

“Sydney and Melbourne are very hard if you’re on a modest income while the outer suburbs of Brisbane or Hobart might be easier,” Mr Clare said. ASFA figures show that singles and couples living a comfortable lifestyle in Sydney would need retirement savings of over $1 million as would all couples in capital cities.

While those on modest incomes were seeing costs rise faster than the CPI, changes to the age pension rate made by the Rudd government in 2009 have made life easier for those people, said Mr Versteege. “Those changes mean a couple with a modest lifestyle earn around the level of the age pension.”

The age pension for a couple is now $34,788 a year and for a single $23,095 a year, just below the levels needed for a modest lifestyle.

The age pension has risen 70 per cent for singles and 54 per cent for couples over 10 years which has “helped contain the savings required at the time of retirement, in order to support either a modest or comfortable lifestyle,” ASFA said in a statement.

“On the other hand, the tightening of the means test has led to an increase in the amount of retirement savings needed to support a comfortable standard of living in retirement.”

Those on comfortable lifestyles have the opportunity to change discretionary spending on things like travel and entertainment “but rises in basic costs like health and power affect all,” Mr Clare said.

ASFA’s comfortable  “is much higher than the vast majority will achieve in retirement,” said Cassandra Goldie, CEO of the Australian Council of Social Services. 

“A far higher priority for Government than boosting compulsory super or tax breaks should be to ensure that access to essential health and aged care services  is guaranteed for all regardless of their income. That requires a stronger tax base, not a weaker one,” she said.