Could You Survive On The Pension?

38 Comments

The aged pension is in the political spot light – again. Arguable its never been out of the spotlight. Fewer issues are more emotive or shrouded in more hysterical dialogue.

Last year Joe Hockey caused a ruckus when he attempted to increase the eligibility age from 65 to 70 by 2035. The the government also provoked outrage when it proposed changes to the way the pension is indexed. It is currently adjusted in line with average wages. The government wants change it so its linked to inflation instead, which they assume will be lower. This means the aged pension will increase at a slower rate leaving recipients worse off. The government claims it has not ‘cut’ the pension but its all semantics and weasel words.

Recently Fairfax got a bit cheeky.  The Financial Review ran a story proposing that the family home be included in the asset test for pension eligibility. Currently it is not, leading to the absurd situation where a couple living in a $2m house can still receive a part pension if their other assets are below $1,145,500.  As you can imagine this ruffled a few feathers and caused the Social Services Minister Scott Morrison to issue an unequivocal denial. We all know that when the Governments says they it going to do something it wont. As the GST, carbon tax and just about everything TA promised leading up to the last election clearly demonstrates.

Our pension system is like a byzantine labyrinth. Its subject to both income and asset tests and rates vary for homeowners and non homeowners. It also varies according to your family situation. Valuing assets is whole other circle of hell.

The pension system

The pension system

Basically a home owning couple is eligible for the full pension if their other assets are below  $286,500.  Couples with combined assets valued between $286,500 and $1,145,500 can receive a part pension which reduces as the value of the assets increases.

The full pension rate is $1,288.00 per couple per fortnight including an energy supplement. That’s an annual income of $30,912. If there’s anything we can agree on its that its not a princely sum.

I conducted a  thought experiment to see how Dadabs and I would go living on the pension. Mind you its a moot point. Barring a major catastrophe we wont be eligible.

Anyhow I’ve donned my analyst hat and guessimated our yearly expenses at Chez Abulous.  This was a tricky task in itself. I’ve assumed that the kids are off our hands (not a safe assumption) and that we’ve consolidated down the one car.

Expenses 2

I’ve reduced our actual water rates by 20% because of the absence of kids. The electricity figure is based on average usage for a 2 person household as indicated on our electricity bills. Our actual electricity bill is unusually low because Dadabs installed solar panels.

After these expenses we’re left with $21,298 or $409 per week between the two of us.

Could we live on this? Its amazing what you can do when you have to. I’d imagine we probably could. It would not be a lavish existence. We would have to keep a track of every cent. My $30 per week coffee habit would have to die as would those indulgent $14 bento lunches.  The repair jobs that occasionally whack you around the head could wreak havoc. Holidays would be a rare indulgence. However they are now – mainly because Dadabs can’t afford the time away from the business.

I would be waving Sayonara to my gym membership and buying my clothes from (shudder)Target.  A night out at the movies followed by a cheap and cheery meal at the local Thai would have to be meticulously planned and accounted for.

My weekly shop at Colesworth would be an exercise in restraint rather than the party it is now. Most sadly of all I’d have to swap out my NZ Pinot Noir for goon. It would be like going back to University.

These would have to go.

These would have to go.

This exercise has taught me two things;

1) My lifestyle is far more lavish and indulgent than I had imagined. Just because we don’t dine out at Quay every week or take ski holidays in Aspen doesn’t make us frugal.

2) The pension issue is one of the most difficult problems Australia faces. Whilst we are not experiencing a budget crisis, the country has some long term issues that need addressing. Revenues are falling and the aging population is putting increasing strain on the public purse. Something has to give.

This year the total spend on the aged pension is estimated at $42b – which is 9% of the total budget.  Discouraging reliance on the pension can only be a good thing. On the other hand work is becoming increasingly fragmented and many people (particularly women who have taken career breaks) simply won’t have adequate super. Its a lose-lose situation.

What’s the answer blog fans?

Could you live on the pension?

Are you worried about retirement?

Love

Mumabulous

 

 

38 thoughts on “Could You Survive On The Pension?

  1. Not worried about retirement but probably should be…. My superannuation is up to SHITE because I’ve been freelancing for peanuts and it’s all too terrifying to think about and nothing in the way of inheritance to fall back on. My current plan A is for my eldest child to become David Beckham. Plan B is to marry him off to Gina Rhinehart (is she even single?) I think it’s a fairly solid plan.

  2. I’m currently on a disability pension and I get family tax benefit A and B, which together amounts to just over $1000 a fortnight. Honestly, if I wasn’t living in government housing then I’m not sure if I could survive. Paul helps a lot, and buys things when I am short. I am grateful that I live in a country that provides income support, but fuck it would be nice if they didn’t punish the people doing the right thing by lowering payment rates and making eligibility damn near impossible.

  3. The majority of my wardrobe is already from either BigW, Kmart, and Target! So theres no big change there for me! Even though, if I went into an old folks home, there’s not much left after they take their cut. Maybe I’d have to happy with op shop clothes(shudder)!

  4. Since I’ve worked for myself I have put nothing away, it’s on the to-do list, although I might make hubby do something with his employers to help me out – I hear that’s a thing. I doubt there’ll even be a pension for most of us when we’re older and that’s why super came in! I am a cynic though.

  5. I would struggle on that amount considering I struggle now. Definitely food for thought Mumabs.

  6. It’s a reality when it’s about YOU and your financial future. We are now aged pensioners (part) and have a super payment too. It was not enough to enable us to stay in our Sydney house and keep paying a mortgage unless I went back to work and I had enough of face to face teaching after many years…. we also helped with our grown kids mortgage starters a way back so our mortgage was high. We are now renting and have a small(ish) lump sum behind us for that one day when we may be able to afford a dwelling to call our own. I am disappointed that some of our financial decisions left us not as well off after 45 years of working but we took different paths trying to work out what we wanted from life. DO start paying super, people…make it a high priority and also getting into a house/unit of your own where it is affordable. We are no longer in Sydney due to its unaffordabilty.

  7. I think honesty for most of us this applies “My lifestyle is far more lavish and indulgent than I had imagined” in comparison to developing countries and those on benefits.

    I doubt we will ever get the pension and my MIL in hostel care tells us every visit how awful it is to live on the pension.

    PS I am a Target gal or MYER on sale, plus Suzanne Grae discuntedl. Frugal indeed.

    Something will give, it will be unpopular if they asset test the family or reverse mortgage it – but it has to happen over a certain amount or multi generational living (like pre pension)

    The government will insist we spend our kids inheritance before they fund anyone’s basic living essentials – in the very near future.

    It’s hard though when you see those who spent all their money with’indulgent’ lifestyles , giving a rats for the future and those who save and scrimp. You know who’ll be penalized.

    I have twin boys I have hopes to keep me in the future (the eldest mr 21 will be owing us money forever) . One day we joked about them caring for us and #2 says #1 can wipe your bums – I’m not wiping your bum.I’ll do other stuff.

  8. PS our electricity is $900 a quarter.

  9. We are a bit screwed for the future, as I haven’t paid super for 3 years now, having been at home, and my partner hasn’t paid it for about 8 years due to a dodgy sole operator “wage” . Stupid stupid stupid and irresponsible, and now our little boy has been diagnosed ASD and we have no idea if we will be taking care of him as an adult. Runs away and frets….

  10. I’m working a government job now (part-time) and so is hubby (full-time) so we will have some super (hopefully enough), but hoping to have some property too through buying-renovating-selling (although that may penalise us, I guess that’s life). I think the pension must be incredibly tough to live on if you had to rent, and still tough even owning your home. I know we could be more frugal but the bills do kill you too – our electricity is around $700 a quarter.

    • Sounds like you guys will be fine. Fortunately government jobs provide good super. My father was a school teacher and whilst he bemoaned being paid less than other professions, parents are doing better than many of their peers now.

  11. Retirement is a lifetime away for me (well, I’m only 30 something so at least 45 years away) and I know that the rules surrounding it will change dozens of times before it will impact me. So no, I haven’t thought about it. Does that make me bad?

  12. I haven’t thought about it, but if I did I would cry. I’m almost 32 with no qualifications and probably $24 in Super.
    Well that’s depressing.

  13. God yeah. It is always in the back of my mind. I don’t think we live a lavish life either, but we certainly don’t go without. We have nice food at home, I’m always buying the kids treats and myself too. I think we need to definitely cut back and try to put more away. I completely suck at finances :/

  14. My only hope is that my husband doesn’t leave me. How’s that for a modern woman’s life plan?? My super is embarrassing because of so much freelance and part time work and now I’m a mum so I basically don’t exist. My husband works his arse off and has great super so, as long as he sticks with me we’ll be fine. That’s depressing as shit. Shameful actually. I’ve never been good with money….

  15. I do the shopping for an elderly woman – the luxury item is the occasional McCains Chicken Parma. I have a good idea of how frugal people need to be. Sadly, she’s self funded so actually on a good income…I’m terrified for those on the actual pension….

  16. Last year I would have said I had no worries about my future as I had very good APS super to access whenever I was ever allowed too. However, when I took my redundancy I also took my super as a pension which is less than the aged pension each fortnight. The good news? I’ll be paid this sum for the rest of my life which is helping in the whole not having a job thing now. The bad news? I’ll be living on this for the rest of my life so I may have to live on baked beans and charity when my husband retires (he started working later so his super won’t be fantastic). My parents subsist on the pension now and it’s a serious issue of living fortnight to fortnight. What a way to enjoy your twilight years after more than 50 years of work….

  17. Great post. I have to admit we would struggle but as like anyone we would adapt. The pension and our aging population is scary. The paper today shows the Intergenerational study that we will live to 95 by 2055 – that isn’t far away!

  18. I have to admit we would struggle on the pension but it is doable – just not that fun! Our aging population is an issue and great post. The Intergenerational survey out today shared we will live to 95 years by 2055 – so the problem will only get more complex for all of us

  19. I’m loving all the comments on this post Mumabs. And I love how you have raised a really important issue. My husband has a government job so his super will be quite good. As for me, I started full time work at 19 and the money put away in my super account from back then has kept growing even though I haven’t put anything into it in the last couple of years. For us, we are not relying on the pension to be around when we retire. It doesn’t change our spending habits but I’m hoping that each mortgage repayment and each $ we put away will help us be able to live without relying on the government.

  20. considering my super is basically a dollar fifty because I work part time and we had to sell our house to pay for our sons therapy because the government wouldn’t, I am not worried about retirement at all. Cause I won’t be.

    I shall be working until I die.

  21. I’m thinking I can maybe exploit my bunion and put it on some foot fetish porn websites. She has a portfolio already. It’s an absolute disgrace the way the government treats pensioners. Excellent post Mumabs.

  22. Fark. Since I left the corporate world I havent put a cent into my super. Here’s hoping the boys remember how nice I was to them when they are rolling in the dosh lol xx

  23. Ridiculous. Think I better become a monk x

  24. My dad is on a pension and I feel so sorry for him. I have no choice than to take him food each week.

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