Rising medical expenses and insurance premiums have crunched retirement budgets, according to the Association of Superannuation Funds of Australia (ASFA).
The industry body explained the cost of funding a comfortable retirement increased 0.7 per cent over the March quarter and 3.3 per cent over the last 12 months to $72,663 per year for couples. Previously, the figure stood at $72,148 per year in the December quarter.
Meanwhile, the comfortable retirement standard for singles rose to $51,630 per year, up from $51,278 in the December quarter.
ASFA attributed this rise to a “raft of higher costs” that include medical expenses and insurance premiums.
Medical and hospital services rose 2.3 per cent in the quarter, higher than 1.2 per cent in the December quarter.
Similarly, insurance premiums have seen considerable hikes over the last 12 months. Prices rose 3.7 per cent from the December quarter and 16.4 per cent annually, which is the strongest annual rise since 2001.
“Higher reinsurance, natural disaster and claims costs continue to drive higher premiums for house, home contents and motor vehicle insurance,” ASFA said.
According to ASFA CEO Mary Delahunty, retirees “continue to feel considerable cost of living pressure on their household budgets.”
However, the pace of price rises has somewhat eased in the past three months, she said, in key spending categories like food and fuel.
In March, annual food costs rose by 3.8 per cent, down from 4.5 per cent in the December quarter.
Automotive fuel prices, too, fell by 1.0 per cent in the March quarter on average. The average unleaded petrol price for the quarter was $1.94 a litre.
ASFA also highlighted the role of energy rebates from July 2023 that have helped drive down electricity prices, with a more moderate rise of 2 per cent over the year.
“Many self-funded retirees have not been eligible for these past rebates but will qualify for the rebates to be paid in forthcoming quarters that were announced in the Budget. Excluding the Energy Bill Relief Fund rebates, prices increased by 17 per cent over this period,” it said.
Interestingly, ASFA’s data found cost crunches did not impact retirees’ appetite for travel. Holidaying domestically remained popular and prices remained elevated for domestic accommodation and airfares, with domestic travel and accommodation rising 1.3 per cent over the quarter.
For Delahunty, ongoing inflationary pressure “reinforces the need for Australia’s strong superannuation system.”
“[It was] designed to ensure retirees can achieve a dignified lifestyle in their post-work years, and adequate retirement income to withstand these more challenging times,” she said.
