The 20 March Age Pension increases have unleashed a huge number of comments from Retirement Essentials members. You have let us know, in no uncertain terms, how difficult it is to survive on the current rate of the pension, or when you are squeezed out of eligibility by deeming on assets that are not earning much at all.
And then there is the more widespread debate since the increases were announced, with many questioning if the 2.1% increase is ridiculously low.
The greatest threat to current retirement affordability is the steeply rising prices of basic household goods and services.
Over the calendar year 2021 fuel rose by nearly 30%, vegetables by 8%, insurance costs 3.5% and beef and veal 7%.
So it is fair to question how a 2.1% increase in retirement income will even go near covering price rises such as those mentioned above.
This leads to another question – whether the method of indexing the Age Pension (which is the main source of income for nearly 70% of older Australians) is either relevant or fair.
As explained last week, the recent increases are mainly based upon price rises in the December 2021 quarter. The annual inflation rate to Dec 2021 was 3.5% while the final Age Pension adjustment was slightly less, at 2.1% – the pension is of course adjusted twice yearly and we did see a 1.6% increase last September.
But the critical issue is that the Age Pension indexation process currently references price rises which are almost three months out of date.
As we have seen, the prices of goods and services in Australia in 2022 are soaring.
Petrol is at its highest price since 1990.
Medical costs and insurance are moving up at a rapid rate.
And meat and veggies are increasing at 7%+ per annum.
This then leads to tough decisions about how to manage your household budget:
- As winter approaches, do you heat your home, or eat properly?
- Can you still afford to consume the five types of fruit or vegetables daily that you know are required for balanced nutrition?
- Can you continue to fill your petrol tank to make necessary trips to family, doctors, or work or care duties?
- Is health insurance now a luxury you can no longer afford?
- Without health insurance, what happens if your health declines and you need expensive treatments?
Such expenditure decisions are where the ‘rubber hits the road’ for ordinary Australians on the Age Pension. Perhaps it’s time the system of indexing this vital income was reviewed and replaced with one which better reflects cost of living realities?
What do you think?
Does the most recent increase in the Age Pension mean it remains a sustainable form of income for your household?
Or are increases in basics – including rental prices – simply outstripping your ability to pay?
And what of those who fund themselves in retirement, but are living on low returns on their investments in this low income environment? How are they faring with galloping fuel, energy and medical costs?
Do you need a boost in household income?
If the recent Age Pension increase feel like just a drop in the ocean, perhaps it’s worthwhile reviewing your eligibility criteria to see if you might be entitled to a higher payment due to lower asset or income levels? Remember, Centrelink does not come looking for you to find out if your assets have declined in value. It’s up to you to inform the agency. You can check our free calculator which will help you to work out what you could be entitled to receive.
And if you are on the borderline for pension eligibility, perhaps a consultation with one of our expert advisers will help you assess your options?