Are retirees doing it tougher?
As you are well aware, Election 2022 is underway.
Claims, counter claims, promises and allegations are flying thick and fast.
And during the past two weeks we have seen two older men (Ray from Newcastle and Fred from the Hunter Valley) step up and claim to speak on behalf of other retirees, asking both the Prime Minister and the Opposition Leader about what they will do specifically to improve the lot of older Australians.
Which raises the important question, are pensioners really doing it tougher than other sections of society?
In order to properly evaluate this suggestion, let’s look at the facts.
According to the most recent data from the Australian Bureau of Statistics (ABS May 2020 ) there are 3.9 million retirees in Australia.
According to Treasury’s Retirement Income Review (RIR, published November 2020), 65% or 2.5 million people are on an Age Pension, 3% on a Department of Veterans Affairs (DVA) pension and another 3% on a Disability Support Pension (DSP), carers payment or special benefit. Thus 71% of people of Age Pension eligibility age receive some form of income support. The Retirement Income Review (RIR) also noted that the cost of providing this support remained ‘relatively stable’ at 2.4% of GDP.
The current Age Pension payment rates are:
- Single, Full pension, including supplements – $987.60 per fortnight
- Couple, Full pension, including supplements – $744.40 per fortnight, each
(Rental supplements may also apply)
By comparison, the current rates for those out of work, on a JobSeeker allowance, are:
- Single, no children – $642.70 per fortnight
- Single, over 60, out of work 90+ days – $691.00
- Couple, no children – $ 585.30 each per fortnight
Many older Australians are forced into retirement before they reach Age Pension age. Ill health, caring responsibilities and loss of a job are common reasons. People in this situation are often forced to fall back on JobSeeker. There has been extensive coverage of the fact that the Jobseeker payment means recipients are below the poverty line, calculated following the OECD method, as half the median household income of the total population. For a single adult, this is $426.30 per week, or $852.60 per fortnight. The Australian Council of Social Services (ACOSS) estimates there are currently three million Australians living below the poverty line.
It is therefore fair to say that, as tough as some pensioners feel they are doing it, they are at least earning more than those below Age Pension age who are seeking work.
However, it is noted in the RIR that those who own a home are in a much more privileged position that those who do not:
‘The retirement income system does not appear to be delivering an appropriate standard of living for many retiree renters. Owning a home has a positive influence on a person’s standard of living in retirement. Whereas, in retirement, renters have higher levels of financial stress. A significant proportion of retiree households that rent are in income poverty, which is even higher for single retiree renters.’
The previously reported March 20 pension increase was 2.5% and will now almost definitely be well below annual inflation, on which we will have an update on April 28.
So it is fair to conclude that Ray and Fred had a point, and those on an Age Pension are not keeping up with the rising cost of living.
On the earnings side, things are also grim.
Planning retirement income used to be much easier, with a 5% return rule commonly used by financial advisers and accountants. But it’s stating the obvious to say that those days are long gone. The current official cash rate of .01% means that most banks are only paying less than 1% on cash deposits. Again, this is not even close to inflation increases. Money invested in cash is, in most cases, shrinking.
And then there are the particular needs and challenges of those pensioners who are on a Disability Support Pension (DSP) or those with special medical or care needs.
As with any generalisation, it is inaccurate to state that all Australian Age pensioners are doing it tough.
But those on a full Age Pension who are renting are no doubt wondering how they will ever cover all their bills.
What do you think?
Are you doing it tougher than other members of society?
If so, what is the answer?
Should an increase of the Age Pension be a priority, particularly for renters?
Or is a base rate increase for all the needed action?
And if you haven’t sorted out your Age Pension entitlements you might be doing things much tougher than you need to.
Our free calculator has all the latest rates and thresholds and will help you work out what you could be entitled to receive.