There is a problem. At least that is what an overwhelming number of retirees say when asked about the adequacy and fairness of the Age Pension. It’s an opinion shared by The Australia Institute’s (TAI) senior economist Matt Grudnoff, who says that the Age Pension system is both “inadequate and hugely complex”.
But Federal Social Services Minister Christian Porter has a totally different view. He says the “arrangements” in place “ensure pension rates are more responsive to pensioners’ actual living cost increases and keep pace with community living standards as measured by wages.”
YourLifeChoices member Lorraine Cobcroft speaks for many cash-strapped retirees when she says: “Our pension system is unfair in the extreme – discriminatory, inadequate in supporting the neediest and complex to administer. It encourages manipulation and cheating and harshly punishes endeavour and responsible planning.”
YourLifeChoices, in association with TAI, has turned up the heat on the Federal Government through the Retirement Affordability Index™, a quarterly analysis that exposes the true living conditions of Australia’s retirees.
To establish the index, we required special household expenditure data from the Australian Bureau of Statistics (ABS) to segment the population into six categories according to their home ownership, relationship status and form of income. These retirement tribes are: Affluent Couples and Singles, Constrained Couples and Singles and Cash-Strapped Couples and Singles.
Next, the Consumer Price Index (CPI) across 12 categories of expenditure was applied, showing how the cost of living has risen much faster for the CashStrapped (retired renters) and at a slower rate for the Affluents (retired homeowners).
Additionally, YourLifeChoices conducted a survey of its 250,000 members to ask about their experience of retirement affordability.
Our aims are: to encourage more realistic researchbased debate on the policy aspects of retirement income and affordability, to prompt deeper questions about the current rules and to help individual YourLifeChoices members who are trying to navigate the confusion of changing rules and regulations.
In the December quarter we found:
- fuel and power were the main drivers of the increase in the cost of living for all tribes except one (Affluent Couples)
- Affluent and Constrained Couples saw the lowest increase in their cost of living (0.4%) while Constrained and Cash-Strapped Singles saw the largest increase (0.6%)
- the increase in the cost of living was offset slightly by a drop in the price of food and non-alcoholic beverages, driven mainly by a fall in vegetable prices due to a favourable growing season
- while recreational costs were the second largest increase for home-owners (except Affluent Couples where it was the biggest increase), the second biggest increase for renters (after power price increases) was housing costs. The increase in housing costs for renters made up about one third of their increased cost of living.