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Insurance cost spike cuts deep into retirees’ finances

Patrick Buncsi22 August 2024
Financial strain in retirement

The costs of funding a comfortable retirement have risen sharply in recent months, with a 14% YOY increase in insurance premiums cutting deep into retirees’ finances, new data from the Association of Superannuation Funds of Australia (ASFA) reveals.

AFSA figures show that the costs of funding a comfortable retirement have increased by 3.7% over the past 12 months, creating further financial strain for retirees.

Over the June quarter, spending budgets for both singles and couples retirees have risen by 0.9 per cent.

As a result, couples around the age of 65 now need $73,337 per year to enjoy a comfortable retirement; singles, meanwhile require $52,085 – this is up from $72,663 per year for couples and $51,630 per year for singles recorded in the previous March quarter.

Insurance premiums have jumped sharply in recent months, up 3.1% in the June quarter and 14.0% over the past year.

ASFA attributed this premium surge to higher reinsurance costs as well as the impact of natural disasters and the associated increase in claims.

For instance, private health insurance premiums increased by an average of 3.03% from April 1, marking the largest rise since the pandemic began.

March figures from the Australian Bureau of Statistics (ABS) also showed a 16.4% annual increase in general insurance prices – the biggest annual premium jump since 2001.

Meanwhile, other cost of living pressures are also beginning to bite for retirees.

Electricity costs, for instance, rose by 2.1% in the June quarter and 6.0% over the past year. While the Energy Bill Relief Fund “provided some relief”, ASFA wrote, those going without rebates would have borne the full 14.6% increase in electricity costs over the 12 months to June 2024.

Despite the easing in annual food inflation to 3.3% in the June quarter, down from 3.8% in March, ASFA notes that retirees are still face rising costs for essentials like fruits and vegetables, which are 3.7% higher than a year ago.

Increased prices for clothing and footwear (up 3.1%), fuel (up 1.7%) and international travel and accommodation (up 8.1%) have also cut into retirees’ budgets.

ASFA chief executive Mary Delahunty, recognised the increased pressure facing retirees as the cost of goods and services “vital to their well-being” begin to mount.

“Retirees are managing an increasingly difficult landscape where the costs of essential goods and services keep rising,” she said.

To buffer against these cost increases, Delahunty urged seniors to maintain adequate superannuation savings, both through compulsory superannuation and voluntary contributions, as well as “considered financial planning” to ensure financial obligations can be met in retirement.

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