The much-touted increase to pensions on September 20 will leave our most vulnerable financial citizens up to 43 per cent short of a comfortable standard of living, I can exclusively - and sadly - reveal.
The larger-than-usual biannual increase is supposed to help pensioners deal with the spike in the cost of living over the past year and a half. From next week, single aged pensioners will receive $32.70 more per fortnight, while couples will get an extra $49.20 combined. That’s a miserable $850.20 and $1,279.20 more per year, respectively.
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The thing is that, in the past year, actual expenses for retired Australians have jumped $2,824 for singles and $4,081 for couples. That makes the so-called pension indexation not even a third of what they need to keep up with the extreme price crunch.
Devastatingly, two in five Australian retirees, Rice Warner said, rely solely on the age pension to live, so the increases will still leave couples 39 per cent short of comfortable and singles an enormous 43 per cent short. In other words, they now have almost only half as much as what they need. The shortfall in dollar terms is now $1,059 for a couple each fortnight and $827 for someone who is contending with costs all on their own. See the terrible state of affairs below.
How far the pension now falls short of a comfortable life
What price is a decent retirement standard?
The estimate of what it costs to live in retirement comes from the Association of Superannuation Funds of Australia (ASFA). Its comprehensive ‘retirement standard’ details a range of stereotypical spending, from essentials all the way through to indulgences. Except there aren't many of the latter in the list ASFA uses to compile the estimated total cost of living.
Check out the table below and how much is allocated for each spending category. Do you spend more or less on these things?
In the past few quarters, ASFA has reported huge pressure on retirees’ budgets from food, fuel, travel and electricity prices, in particular. In fact, in the year to June, expenses overall for the retired have risen slightly more than inflation – 6.1 per cent versus 6 per cent.
The cumulative effect, and the fact that the age pension has failed so badly to keep up, has seen the association revise up the lump sum it says you should target at retirement to be able to live OK.
ASFA’s figures also assume that you own your own home outright and so have no accommodation costs. So, pensioners who rent are in a far more dire predicament. Rental supplements are increasing, but to nowhere near as much as they need to, with rents rising about 10 per cent, year on year.
The Commonwealth Rental Assistance payment will grow by $27.60 per fortnight for singles at the maximum rate and $52 per fortnight for couples at the same. That takes the maximum amount per fortnight to $184.80 per for singles and $123.20 per couples. It’s a drop in the accommodation ocean.
The only positive thing is that it looks as though the 400 basis points of interest rate rises we have seen since May last year are finally starting to contain inflation. From a high of nearly 8 per cent at the end of last year, the latest monthly reading has come in at just 4.9 per cent. This means, just maybe, price rises will start to slow. And that’s something pensioners ‘dearly’ need.