Early access to superannuation

In the wake of last week’s ‘fall off your chair’ Intergenerational Report, we now have the suggestion that young people should be able to access their super early to buy a home.

The idea was floated by Treasurer Joe Hockey as a way of allowing younger homebuyers to access sufficient funds for a deposit for a first home, as they battle the current trend of rising house prices in most Australian capital cities.

“I get a lot of people approaching me saying that young people should be able to use their superannuation to fund a deposit on a home, on their first home,” Mr. Hockey said. “I am concerned about rising house prices and the accessibility to homes and homeownership for younger Australians, but we’ve got a limited pool of savings. We need to have these conversations.”

Responses to the suggestion of early access to super for first homebuyers were largely negative. John Daley from the Grattan Institute think tank declared that ‘Economics 101’ would show that such access to a limited pool of housing stock would force house prices even higher.

In an article on the ABC’s The Drum website, journalist Ian Verrender stated that it “beggars belief” such an idea was flagged, “given our super system is hardly balanced and the housing market is already overheated”.

Support for the idea was also ranged from lukewarm to tepid within the Coalition ranks, with the Assistant Treasurer Matthias Cormann having previously ruled out such a policy and Mr Abbott stating somewhat equivocally that the concept deserved further debate, while there are

“obviously some further issues around it”.

Unsurprisingly, former Prime Minister and so-called ‘father’ of our compulsory superannuation system, Paul Keating, was the most trenchant of all. In an opinion piece in the Fairfax newspapers Keating slammed the plan as “not an innovation and …not responsible enough even to be called a thought bubble”. He pointed out that removing a home deposit from younger workers’ ‘modest pool’ of superannuation savings would “effectively eliminate the base from which the important compounding would otherwise occur”. It is this compounding which means that younger workers’ life-long superannuation inputs should result in a reasonable retirement nest egg.

Read Mr Hockey’s suggestion in The Sydney Morning Herald.

Opinion: A not-so-super idea

To be fair to Mr Hockey the fourth Intergenerational Report (IGR) should spark a robust debate about our economic and social future. So to consider ways of changing super is a good start. But to suggest young people dip into modest balances to buy a home, thus wiping out any hope of a reasonable retirement lifestyle, makes very little sense indeed. Apart from the obvious macro-economic repercussions – higher house prices, scarcity of housing stock and decimated retirement savings – there are other issues at play here.

If the IGR is indeed meant to trigger meaningful debate about future challenges and how we employ the many and varied levers of government to achieve a fair and equitable outcome for all Australians, then all options should be on the table. This phrase is, of course, ‘pollie speak’, which is trotted out when our MPs wish to appear reasonable, perhaps even bi-partisan.

Of course all options should be on the table, but when it comes to superannuation, sadly, all options are NOT on the table at all. The tough options are well and truly under the table, in the cellar in a deep, dark bin that few treasurers have the ticker to open. Yes, I am referring to middle class welfare in the form of concessions on superannuation contributions and low or no tax on drawdowns. Those in our nation who are relatively well-off have a magnificent opportunity to put more dollars into super with little penalty – in fact no penalty at all when this money is taken as a lump sum.

 This is hardly ‘self-funding’ when you are given such a free kick from the policy makers. And those who do pull down their lump sums are entitled – again without penalty – to spend this money and then apply for an Age Pension. It’s called double dipping and presents a very real drain on the exchequer.

So rather than slam the Treasurer for opening the debate on access to super, let’s applaud him. Let’s agree that robust analysis of our retirement income/superannuation system is long overdue. Then we can put ALL ideas on the table and make the debate truly effective.

What about you? Do you agree young people should drawdown their super to purchase a first home? Or do you think there are better ways of reorganising superannuation policy for the broader population? 

Written by Leon Della Bosca

Publisher of YourLifeChoices – Australia's most-trusted and longest-running retirement website. A trusted voice on Australia's retirement landscape, including retirement income and planning, government entitlements, lifestyle and news and information relevant to Australians over 50. Leon has worked in publishing for more than 25 years and is also a travel writer and editor, graphic designer and photographer.

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