Retirement costs rising despite COVID impacts

The increase from a year earlier was 1.8 per cent for couples and 1.6 per cent for singles.

“COVID-19 has had a substantial impact on Australia’s financial and economic conditions, but there has been a partial unwinding of both price increases and decreases that immediately flowed from the impact of the pandemic,” said ASFA CEO Dr Martin Fahy.

ASFA noted that retiree lifestyles were yet to return to normal as restrictions on travel and changes to entertainment and dining-out options had a significant short-term impact on retirement lifestyles.

During the September quarter, health insurance premiums remained unchanged but would have increased from 1 October by around 3 per cent for many retirees.

“Recent reductions in interest rates and dividends are having an impact on the financial position of many Australian retirees,” Dr Fahy said.

“Dramatic changes in our lifestyles had a big impact on demand and prices right across the economy, but for at least some categories of expenditure, there is a return to something closer to normal.”

Dr Fahy noted that the increase in the cost of retirement despite lifestyle changes means members who are currently still working require greater accumulation of superannuation during their working lives.

“For wage earners, the increases in costs in retirement have highlighted the need for the superannuation guarantee to move from 9.5 per cent to 12 per cent as legislated. Over the year to September 2020, official figures indicate that wages grew by only 1.4 per cent on average for the entire economy, and by only 1.3 per cent in the private sector. Over the September quarter, increases in wages in the private sector averaged just 0.1 per cent,” the ASFA statement read.

Increases in retirement costs are outstripping growth in wages and higher contributions are needed for future retirees to achieve the standard of living they want and deserve in retirement.