The cost of retirement went up during the September quarter, driven by factors such as a rise in childcare expenses, following the end of free childcare, despite these expenses not typically relevant to retirement budgets, according to the Association of Superannuation Funds of Australia (ASFA).
Couples aged around 65 living a comfortable retirement needed to spend $62,083 per year, up 0.3%, and singles $43,901, up 0.5% on the previous quarter. The increase from a year earlier was 1.8% for couples and 1.6% for singles.
ASFA chief executive, Dr Martin Fahy, said: “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”.
“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.”
ASFA noted 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% for many retirees.
“Recent reductions in interest rates and dividends are having an impact on the financial position of many Australian retirees,” Fahy said.
ASFA said for wage earners, the increase in the cost in retirement highlighted the need for the superannuation guarantee (SG) to move from 9.5% to 12% as legislated.
It said over the year to September 2020 wages grew by 1.4% on average for the entire economy and only by 1.3% in the private sector. During the September quarter, wages in the private sector increased on average by 0.1%.
“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,” ASFA said.