Can you live on an Age Pension?

Indexation means that Age Pension payments increase on 20 March 2017. While any increase is welcome, will the extra $10.40 per fortnight really make any difference?

Twice a year, on 20 March and 20 September, the Age Pension is indexed in line with the consumer price index (CPI) and then benchmarked against the Male Total Average Weekly Earnings (MTAWE). And it’s the benchmarking that really makes the difference.

As part of the 2014/15 Federal Budget, it was proposed that pensions would only be indexed in line with CPI, a change that would have taken effect from 1 July 2017. When economic modelling was done on this move, it was estimated that over 10 years it would cost age pensioners $80 per week. Hardly surprising then that there was uproar and the move was eventually scrapped. However, the trade-off was the much-maligned rebalance of the asset test thresholds that occurred on 1 January this year.

So for those pensioners who have managed to hold on to their payment post-January, the March indexation will increase a fortnightly full single Age Pension by $10.40 and the couples’ rate by $7.80 (for each eligible member). This will take the fortnightly full Age Pension to $808.30 (plus Pension Supplement of $65.90 and Energy Supplement of $14.10). Each eligible member of a couple will receive $609.30 (plus Pension Supplement of $49.70 and Energy Supplement of $10.60).

While the increases are probably not worth writing home about, it’s important to note that they are considerably more than the September 2016 increase of $3.10 for singles and $2.40 for each member of a couple.

So, with an annual full single Age Pension totalling $23,095 (including supplements), is this enough on which to live a dignified life? Most people would respond in the negative and if they have to pay rent or a mortgage, then the chances of this being enough are considerably reduced.

As part of our recent YourLifeChoices Retirement Insights survey, we asked our members how much they thought was enough to live on and, of the 6700 responses we received, only 11.7 per cent thought that between $20,000 and $30,000 was enough. Between $30,000 and $60,000 seemed more realistic to almost three quarters of respondents:

Annual income required

Percentage of respondents

$20,000 to $30,000

11.7 per cent

$30,000 to $40,000

23.7 per cent

$40,000 to $50,000

24.5 per cent

$50,000 to $60,000

20.15 per cent

However, with 34.08 per cent of respondents who currently do, or plan to, fund their retirement with a full Age Pension, few will have the amount they believe to be enough. Perhaps the 36.27 per cent who will fund it with a part Age Pension or the 29.21 per cent who will be fully self-funded will have a better chance of meeting their income expectations.

Time and time again we state that a full Age Pension of $23,000 is simply insufficient to live on in retirement, yet there seems to be little political appetite, on either side of the House, to tackle this fundamental problem?

What do you think? Is the Age Pension enough? Would you, if you don’t already, be able to live a dignified life on $23,000 a year? What measures would you like to see announced in the upcoming May Federal Budget to give Age Pension payments a boost?

Related articles:
Pension increases – 20 March 2017
Age Pension less than minimum wage

Written by Debbie McTaggart