Financial discomfort and aged care concerns

This week, National Seniors launched its final research report produced in conjunction with investment management firm Challenger.

Older people’s financial wellbeing and preferences reports on several important financial issues of our time, including the adequacy of the Age Pension, concerns about paying for aged care costs, retirement finance options, and older Australians’ levels of financial comfort in general. 

The report is based on the financial module of the 12th National Seniors Social Survey, conducted in February 2024.  

Approximately 4,700 people aged 50 or older from across Australia responded to the financial questions. As always, we are grateful to those who participated, making this research possible. 

A major issue that emerged from the survey results concerns the adequacy of the Age Pension. 

While respondents were not asked directly if the Age Pension is sufficient income in older age, several survey questions pointed to the fact that it is not sufficient. 

One question asked respondents to describe how they felt about their financial circumstances on a scale from “very tight” or “tight” to “comfortable” or “very comfortable”.  

Overall, 66% of respondents felt comfortable, with 13% of those very comfortable.  

Unsurprisingly, this varied with the level of savings (including super) people had. For example, only 50% of those with less than $350,000 in savings felt comfortable, compared to 84% of those with over $350,000 in savings. 

But among people solely dependent on the Age Pension, only 25% felt comfortable. For the majority, finances were tight or very tight. 

Another question asked respondents who owned their homes outright how much extra income per annum above the Age Pension they would need to maintain a basic lifestyle. 

While 11% felt no more income was required, the rest specified an amount. The median amount people suggested was an additional $10,000 for singles and $15,000 for couples. 

In other words, they felt considerably more than the Age Pension is needed, given the Pension was around $28,500 per year for singles and $43,000 for couples at the time the question was asked. 

Incidentally, the reason this question was only asked to people who owned their homes outright was because the Pension safety net was designed with homeowners in mind. We already know how hard it is for people paying rent or a mortgage to live well on the Pension, and therefore how much more income people in those situations would need.   

Some readers may recall the heartbreaking stories people told us in last year’s National Seniors Social Survey, of being stretched to the limit by cost-of-living increases in general and housing expenses in particular.  

Research into pension adequacy by The Benevolent Society also showed that not owning a home “constitutes the single biggest factor contributing to financial hardship among pensioners”. 

The survey included several questions about financial advice. Around half of all respondents said they either wouldn’t use it (11%) or had received adequate advice already (40%). 

Among those who would like financial advice, the topic most people wanted to know more about was aged care cost calculations (selected by 42% of this group), followed by investment options to best meet their needs (34%). 

But numerous people said there were barriers to them obtaining financial advice.  

Cost was the barrier identified by a third of those who wanted financial advice (32%), followed by concerns about the independence of advice (29%), and where to find an appropriate adviser (20%). 

Around two-fifths of those who wanted financial advice (41%) said there were no barriers to accessing it. Those people were more likely to be men, to be older, to be healthier, and to feel financially comfortable. 

In line with the interest in aged care cost calculations, 63% of survey respondents said they were concerned about having to pay for their own aged care. Those who were not concerned either had enough to pay for it or were confident they would be covered by the government safety net. 

Note, this was six months prior to the recent launch of the new Aged Care Act. It may be interesting to see the results if we were to ask this survey question again in the future, once the financial implications of the new Act are clearer for all.