Individuals and couples relying solely on the Age Pension are falling further behind the cost of living, spurring calls for the federal government to instigate an urgent independent retirement income review.
Data released by the Association of Superannuation Funds of Australia (ASFA) shows there is now a $3000 to $4000 per annum shortfall between the full Age Pension and what it costs to have a “modest” lifestyle in retirement.
For those wanting to have a “comfortable” retirement lifestyle, the gap is much wider at around $25,000 per annum.
Current Age Pension rates are just under $31,000 per annum for a couple and about $20,500 for a single.
But ASFA’s Retirement Standard December quarter figures show it now costs a couple around $34,000 a year to enjoy a modest lifestyle, and a single about $24,000.
Couples wanting to lead a more comfortable life, with the odd holiday, better healthcare cover and more spending power will need to spend $59,236 per year and singles $43,184, which are both 0.5 per cent increases on the previous quarter.
“The cost of retirement has not substantially increased over the past few quarters, which is positive for current retirees,” said ASFA chief executive Pauline Vamos.
“However, many Australians are still retiring with an inadequate amount of superannuation. 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.”
The latest numbers follow the release of Australian National University poll results earlier this week, which found that more Australians were fearful of not having enough funds in retirement.
The ANU poll showed that 40 per cent of respondents were not confident or concerned that they would be able to have a comfortable living standard in retirement.
Speaking to The New Daily, the chief executive of seniors advocates group COTA Australia, Ian Yates, said the ASFA figures demonstrated that the current Age Pension was not high enough and effectively put many pensioners below the poverty line.
“To have a comfortable lifestyle you would really need to have been paid super for your whole working life,” he said.
“We have been arguing for a comprehensive retirement incomes review. This would look at the need to increase the Superannuation Guarantee levy and whether there are other policy settings that can add to the pension.”
Mr Yates said the Murray financial system inquiry had already advocated for the development of a comprehensive retirement product that would incorporate lifetime annuities and other income streams.
“The government is looking at lots of things but there’s no structured process at the moment for having this conversation,” Mr Yates said.
The most significant price rises in the December quarter contributing to the increase in the annual budgets were domestic holiday travel and accommodation (+5.9 per cent) and international holiday travel and accommodation (+2.4 per cent). The most significant offsetting price falls were automotive fuel (-5.7 per cent), fruit (-2.6 per cent) and communications (-2.4 per cent).
“The earlier you engage with your superannuation, the easier it will be to accumulate enough to support you in your post-work years. Check your balance, contact your fund and set yourself up now for a comfortable retirement,” Ms Vamos added.