Are prices higher for retires?
It’s logical to follow the quarterly and annual Consumer Price Index (CPI) changes to try to keep track of the price of household goods and services.
If you did this you would believe that most Australians are subject to about the same increases and so are all doing it as tough as each other.
But here’s the trick. Whilst the CPI is a ‘headline’ number – one which is also used as a benchmark for changes to social security payments and retiree benefits – it is not the most accurate measure of how retiree households are faring.
There are two other benchmarks which are more accurate, and therefore more relevant when it comes to household expenditure in retirement.
And these are part of what the Australian Bureau of Statistics (ABS) refers to as the Selected Living Cost Indexes (SLCIs).
|Selected Living Cost Index (LCI)||December 2021 increase||2021 12-month increase|
|Pensioner and beneficiary LCI||0.8%||3.0%|
|Age Pensioner LCI||0.8%||3.4%|
|Other government transfer LCI||0.9%||2.7%|
|Self-funded Retiree LCI||0.9%||3.3%|
These five sub groups are measured in order to gain a much clearer picture of how people at different stages of life are managing to cover their household costs. A striking difference between the CPI and the SLCIs is that the CPI includes house purchases but excludes interest and credit charges. Both the Age Pension LCI and Self-funded Retiree LCI do not include house purchases but do include interest and credit card costs.
The table above shows the differences between these different population groups by both December 2021 quarter and full year 2021. Those who are still working saw price increases of 2.6% over the year. Those on an Age Pension or self-funded retirees saw price increases of 3.4% and 3.3% respectively.
The ABS has noted that the Age Pensioner household sub group showed the highest annual increase, largely due to the cost of food (which makes up a higher proportion of spending by this segment) and housing costs. If renting whilst on an Age Pension, you are likely to be spending more than a third of your income on rental costs.
These indexes are very specific, but that makes them very useful. So if you feel as though it is your fault that you can’t make ends meet despite a 2.1% Age Pension income increase at the end of March, it very well might be because your household costs have gone up much more than the amount of the increase. It’s not you – it’s something out of your control!
What do you think? Do you feel as though prices are rising faster than your income? We’d love to hear your thoughts – particularly if you have any money saving tips to share.
And if you are still self-funded, perhaps it’s time to recheck your Age Pension eligibility? Both the income and assets test thresholds also increased on March 20, so you may now be able to qualify – not just for extra income, but also for the very valuable Pensioner Concession Card (PCC) or, if still self-funded, for a Commonwealth Seniors Health Card (CHSC).
So how are rising prices affecting you?