Pressure for more products to unlock retirement wealth

Australian retirees have an estimated $1 trillion in home equity – more than enough to transform their retirement, but they need better advice, support and financial products to tap into that wealth.

That’s the view of Household Capital chief executive Dr Joshua Funder who says that for baby boomers, superannuation alone is not enough to fund a long and active retirement.

Baby boomers make up about 25 per cent of the population but have the highest home ownership of any age group at 80 per cent.

Accessing that home equity could radically improve lifestyles, but sentiment surrounding the family home leaves many people hesitant to utilise what is often their largest asset.

According to YourLifeChoices Older Australian Insights 2022, 67 per cent of over 50s want to age in place. Research from Property Planning also also shows that eight in 10 baby boomers want to stay in their own home to stay close to friends and family or in the same location, because it’s too daunting to face a move and the financial and tax implications are viewed as a burden.

Read: Older Aussies working longer as kids refuse to leave home

Home equity retirement funding group Household Capital wants superannuation funds to provide more solutions for members to help them better navigate the various stages of retirement and aged care.

“It’s imperative that superannuation funds deliver comprehensive solutions to members to ensure they can live well in retirement,” says Dr Funder, who explains that baby boomers have not enjoyed a full working life of super contributions.

“The reality is for many Australian retirees, they do not have enough funds in their superannuation accounts when they retire.

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“Australian retirees have already saved over $1 trillion in home equity, which can transform retirement outcomes.

“Delivering straightforward access to superannuation and home equity retirement funding is what current retirees need to access their wealth and have confidence in the system.”

That’s a sentiment supported by Productivity Commission chief Catherine de Fontenay, who told Professional Planner that Australians aren’t drawing down on their wealth.

“They’re drawing down their bank balances, but the value of their house is going up,” she says.

“A lot don’t liquidate their house because they are worried about how long they’re going to live or being able to afford aged care, even though there are other ways to afford aged care.”

In 2019, the Retirement Income Review declared there were three pillars of Australian retirement funding, a means tested Age Pension, compulsory superannuation and voluntary savings, including home ownership. As a result, a subsequent Retirement Income Covenant that takes effect from 1 July 2022 means superannuation funds are obliged to provide members with retirement funding strategies that cover assets other than super.

Read: Despite Government rethink of Centrelink most retirees remain unable to connect to their wealth

“What’s critical is to consider ways to allow the nation’s retirees to safely and responsibly unlock the value stored in their home alongside their superannuation,” says Dr Funder.

“Home equity can play a major role in providing access to wealth, adequate retirement funding, and confidence for a generation.”

Household Capital advisory board chair Professor Deborah Ralston, who co-authored the Retirement Income Review, says the covenant is about helping people approaching retirement to set themselves up.

“Retirement planning doesn’t end at retirement, that’s important to know,” says Prof. Ralston.

“That’s also a dynamic period of time; at retirement 45 per cent of people are on the Age Pension but, by the age of 80, around 80 per cent of people are reliant on the pension because superannuation balances are not significant as yet for most people.”

Household Capital is a preferred partner of YourLifeChoices.

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Written by Jan Fisher