Business Daily Media

how the pension and super could leave you behind

how the pension and super could leave you behind

How we fund retirement in an ageing century ought to worry all of us.

But one group of us should be much more worried than the rest.

In a new set of research briefs[1] published by the Centre of Excellence of Population Ageing Research, we report that most people do well out of our retirement income system and that the living standard of retirees has improved over the past decade.

In international comparisons, our system ranks highly[2], for good reason.

Most retirees do well

About 60% of older Australians can afford a lifestyle better than that deemed to be “modest” by widely used standards.

Households headed by baby boomers reaching retirement age between 2006 and 2016 did so with incomes 45% higher than those who retired a decade earlier.

Typical boomer households aged in their late 60s earn almost as much as they did when they were still working - only 20% less, that is, with about 80% of their working income maintained.

And their needs are lower. Lower spending in retirement is common because older households need to pay less for transport, less for working clothes, and have more time to cook.

Many continue to save while in retirement.

Read more: Please, not another super scheme, Mr Keating. It's what the pension is for[3]

And they tend to spend less over time, rather than more over time as benchmarks publicised by the superannuation industry[4] assume.

When we included the value of living rent-free for the 80% or more of retirees who own their own home (about A$10,000 per year on average), we found older Australians live in no more poverty than working age Australians.

But not renters

The living standards of those who rent in retirement are very different. Only about 15% of older renters can afford a lifestyle better than “modest”.

Single renters are particularly badly off.

Among all older people only about 10% fall below the poverty line set at half the median income.

Among older Australians who rent, 40% fall below.

Among older Australians who rent alone, it’s more than 60%.

If that relative poverty measure seems too abstract, an absolute dollar figure might help.

Alarming research aired on the ABC in September found that, on average, aged care homes were spending $6.08 per day on food[5] per resident.

Our research finds that among pensioners who rent alone, one quarter spend even less than that[6] per day.

And it’s getting worse

The pension has always favoured home owners.

On the one hand it is insufficient for renters and on the other it doesn’t cut pension payments to the owners of very valuable homes, because the value of any home - no matter how big - is excluded from the pension means test.

Read more: Let's talk about the family home ... and its exemption from the pension means test[7]

Rental assistance, introduced to complement the pension in the 1980s, was meant to alleviate this, and to some extent it does.

But it climbs only in line with the consumer price index every six months, which usually fails to keep pace with rents.

Read more: Life as an older renter, and what it tells us about the urgent need for tenancy reform[8]

Sydney rents have doubled over the past two decades. The consumer price index has climbed 68%.

As a result, rental assistance is less effective in reducing financial stress than it was when it was introduced, and is set to become even less effective if rents continue to climb more quickly than the price index.

And more of us look set to rent

Households headed by Australians aged 35 to 44 are now 10 percentage points less likely to own their own home than were households headed by people of the same age a generation earlier.

They might be merely postponing buying homes until they are older as more of what would have been their income is sequestered into super and they enter the workforce and retire later.

Read more: Explainer: what's really keeping young and first home buyers out of the housing market[9]

If so, they might end up owning and paying off homes by retirement at the same rate as boomer households did before them.

If not, more and more of them could end up in poverty in retirement.

Authors: Rafal Chomik, Senior Research Fellow, ARC Centre of Excellence in Population Ageing Research (CEPAR), UNSW

Read more http://theconversation.com/renters-beware-how-the-pension-and-super-could-leave-you-behind-105840

Business Daily Media Business Development

How Microsoft's Activision Blizzard takeover will drive metaverse gaming into the mass market

Ready Player 1,000,000,0001?Sergey NivensMicrosoft was positioning itself as one of the pioneers of the metaverse even before its US$75 billion deal to buy online gaming giant Activision Bli...

Theo Tzanidis, Senior Lecturer in Digital Marketing, University of the West of Scotland - avatar Theo Tzanidis, Senior Lecturer in Digital Marketing, University of the West of Scotland

Some of the super-rich want to pay more tax – but society cannot afford to depend on them

Shutterstock/PilgujDemands for the super wealthy to pay more taxes are not new. But they don’t usually come from billionaires or millionaires.Yet on January 19 2022, around 100 of the ...

Peter Bloom, Professor of Management, University of Essex - avatar Peter Bloom, Professor of Management, University of Essex

A killer app for the metaverse? Fill it with AI avatars of ourselves – so we don't need to go there

Ready avatar one?Athitat ShinagowinBig numbers coming. Microsoft’s US$75 billion (£55 billion) acquisition of Activision Blizzard has landed – true to Call of Duty vernacul...

Alex Connock, Fellow at Said Business School, University of Oxford, University of Oxford - avatar Alex Connock, Fellow at Said Business School, University of Oxford, University of Oxford

Labelling Equipment; Prayers Have Been Heard and, Answered

If you are an instrumental part of a management team for a business that now requires labels for their products or goods, then traditionally you’d have had one of three choices, if the...

Business Daily Media - avatar Business Daily Media

Leading Australian Microsoft partner Satalyst acquired by Canon

Satalyst, one of the leading Microsoft cloud and security partners in Australia, has today announced that effective immediately it has been acquired by Canon Australia. Satalyst will joi...

Business Daily Media - avatar Business Daily Media

How Timeline Maker Helps Business Owners On Their Targets

With many businesses today, the challenge is to make the audience know what you are all about. You can never go wrong with a website or an online presence for it is one of the most effecti...

Business Daily Media - avatar Business Daily Media



NewsServices.com

Content & Technology Connecting Global Audiences

More Information - Less Opinion