One group of older Australians should be much more worried than the rest when it comes to funding their retirement, according to research.
The Centre of Excellence of Population Ageing Research (CEPAR) reports that most Australians “do well out of our retirement income system and that the living standard of retirees has improved over the past decade”.
Rafal Chomik, senior research fellow at CEPAR, recently wrote in The Conversation that our system ranks highly in international terms.
“About 60 per cent of older Australians can afford a lifestyle better than that deemed to be ‘modest’ by widely used standards,” he says.
“Households headed by Baby Boomers reaching retirement age between 2006 and 2016 did so with incomes 45 per cent higher than those who retired a decade earlier.”
The CEPAR research claims that ‘typical’ retired Baby Boomers households earn only 20 per cent less than when they were working. And their spending requirements are lower.
“Lower spending in retirement is common because older households need to pay less for transport, less for working clothes, and have more time to cook,” says Mr Chomik. “And they tend to spend less over time, rather than more over time as benchmarks publicised by the superannuation industry assume.”
CEPAR research concludes that because about 80 per cent of retirees own their own home, older Australians live in poverty at about the same rate as working-age Australians.
But not renters. And especially not single renters.
The living standards of those who rent in retirement were very different, says Mr Chomik, with only about 15 per cent of older renters able to afford a lifestyle better than ‘modest’.
“Among all older people, only about 10 per cent fall below the poverty line set at half the median income. Among older Australians who rent, 40 per cent fall below. Among older Australians who rent alone, it’s more than 60 per cent.”
In YourLifeChoices’ 2018 Retirement Matters Survey, 47.6 per cent of 5748 respondents said they were on a full or part Age Pension. But for those receiving rental assistance, the most recent increase, on 20 September 2018, was $1 per fortnight or 50 cents a week.
Rental assistance climbs only in line with the consumer price index (CPI) every six months, and struggles to keep pace with rents. Sydney rents, for instance, have doubled over the past two decades while the CPI climbed 68 per cent.
Research by the Australian National University’s Centre for Social Research and Methods analysed five government payments to assess how they could be restructured to reduce the poverty gap. It concluded that Newstart should increase by $270 per fortnight, the Age Pension by $11 per fortnight and rent assistance by about $10 per fortnight.
“Rental assistance is less effective in reducing financial stress than it was when it was introduced, and is set to become even less effective if rents continue to climb more quickly than the price index,” says Mr Chomik.
With fewer Australians retiring as homeowners, rental assistance is a hot potato.