Age pension not enough to cover even the basics: Study

Reliance on the aged pension, without additional income, is proving insufficient to cover even basic lifestyle costs for retired Australians, a new study has found.

The research, conducted by the National Seniors Australia (NSA) and investment firm Challenger, concluded that the fortnightly payments were failing to deliver financial security to recipients. Just one in four (25%) felt comfortable if the Age Pension was their sole source of income.

Nearly 90% of survey recipients said the pension alone is insufficient for a basic lifestyle in retirement; fewer than one in 10 (9%) believed it provided a comfortable lifestyle.

More than half of surveyed homeowners declared that they would need an additional $10,000, for singles, and $15,000, for couples, on top of the government payments each year to ensure financial security and support a basic lifestyle.

The vast majority of those surveyed – 76% – owned their home outright. At least 50% of homeowners thought a basic lifestyle required an annual income of $39,000-plus for singles or $56,000-plus for couples.

Currently, single Age Pension recipients receive around $29,800 each year, or $44,900 for couples, inclusive of supplements.

Among the dominant concerns for older Australians flagged in the survey was the ability to afford aged care. Around 60% of survey participants in the most recent study expressed concerns over how they would cover these expenses; this is up significantly from a 2021 survey, which found just 38% of respondents worried about aged care costs.

Only 18% of respondents felt they had enough to afford aged care.

Surging cost of living expenses and inflation have challenged many pensioners and, according to the NSA and Challenger, have exacerbated the divide between the haves and have-nots.

Only half of those surveyed with less than $350,000 in savings reported feeling financially comfortable, compared to 84% of those with more than $350,000.

When respondents were asked how they would spend an extra $100 per week, one-third (33%) said they would save the extra money for later spending — such as a holiday or other big-ticket items — while another 29% stated they needed the funds for their everyday essentials.

Seniors in want of financial advice

The survey of 4,700 senior Australians found that financial advice is associated with positive outcomes, with 41% of respondents (who had already received financial advice) being more likely to feel financially comfortable, to be retired, and own their home outright.

Only a small proportion (11%) said that they would not use financial advice, while around 40% said they had already received adequate advice and required no further.

Among the chief barriers to obtaining advice was expense (32%), concerns over the independence of advice 29%, uncertainty about where to find an appropriate adviser (20%) and the perceived complexity of one’s financial matters (11%). Just over 40% identified no barriers to advice.

Close to half (46%) of those surveyed were interested in a lifetime income option for at least some of their retirement income. The survey authors found that people who would consider investing in lifetime income were more likely to be concerned about stock market volatility, to have lower savings, and to have poorer health.

This compares to less than one in 10 Australians who currently have a guaranteed income stream, either directly through an annuity or as part of their (defined benefit) superannuation. One in five said they didn’t have enough savings to consider guaranteed income as an option.

“We found that calculating aged care costs was the topic most people wanted financial advice about,” said Chris Grice, Chief Executive Officer of National Seniors Australia.

“Older Australians feel anxious about the prospect of needing aged care and the unknown costs associated with it. We must ensure seniors are not left to navigate these challenges alone, without adequate guidance or resources.”