A comfortable retirement would now need an income of $70,482 a year for couples and $50,000 for a single person, after a rise of 1.1 per cent in the March quarter.

Fortunately, for retirees the strength of equity and bond markets has meant that superannuation funds had performed strongly this financial year. Up until concerns emerged of a potential US debt default, funds were looking at returns of about 8 per cent this year.

The Association of Superannuation Funds Australia chief executive Dr Martin Fahy said retiree budgets had been under pressure from inflation in the past 18 months, especially for the rising costs in essential items like food and energy. Electricity costs had risen 15 per cent in the past year.

“Self-funded retirees would not be eligible for Federal Government budget measures aimed at relieving the cost of living pressures and despite recent adjustments to the aged pension, payments continue to lag inflation,” Fahy said.

He said in the March quarter medical and hospital costs were up 4.2 per cent and pharmaceutical costs rose 4.5 per cent. Insurance costs rose by 3.5 per cent.

Domestic travel and accommodation costs rose 4.7 per cent in the quarter and were up 25 per cent for the year. International travel costs fell by 8.2 per cent in the quarter but this was because many of the markets went into their low season. The annual increase was still 38 per cent.

Fruit and vegetables were up 2.4 per cent in the quarter and food and meal costs were up 8 per cent for the year.

The annual increase in gas prices of 26 per cent was the highest on record. Electricity was up 15.5 per cent for the year. Costs were expected to rise another 25 per cent from July 1, however some of this could be offset by Government rebates.

From July 1, the superannuation guarantee increases to 11 per cent which Fahy said would help people save for a better retirement.

Fahy has also announced he would step down from his ASFA role after seven years in the job.