Yesterday’s report from the Committee on Economic Development (CEDA) on retirement income and housing recognised the critical role that home ownership plays in retirement. Put simply, most retirement renters will live in poverty.
It’s a perfect storm as the report The Super Challenge of Retirement Income Policy, has revealed. With a doubling of the dependency ratio (those working and paying tax compared with those not doing so) within 40 years, and more older Australians living longer on less, a roof over their heads is less likely to be guaranteed. As noted in the executive summary of the report, housing makes a critical contribution to help sustain living standards for older Australians.
The CEDA report also makes a very important point in regard to superannuation, by reminding us that compulsory super should be “seen as a way to help people fund their retirement – not as a way to save the government money.” Four recommendations for a “prosperous and dignified retirement for all Australians” are put forward by CEDA:
- Adopt clear and consistent objectives.
- Recognise housing as the fourth pillar of the retirement system – allowing first homebuyers access to their super to buy a house.
- Address the lack of equity in super taxation – with super contributions made from AFTER-tax contributions and including the family home in the Age Pension assets test.
- Create more innovative income stream/post-retirement products.
And along with other think tanks and community associations, including the Committee for Sustainable Retirement Incomes (CSRI), COTA Australia and delegates at last week’s National Reform Summit, CEDA notes that the need for a rigorous retirement income policy review is urgent.
With housing affordability declining and private rental becoming close to unaffordable, many older Australians will face the prospect of, at best, a retirement of genteel poverty and, at worst, homelessness.
It is about time a discussion on retirement income included a debate about the lack of affordable housing. More and more Australians are entering retirement with excessive mortgages or, perhaps worse still, no mortgage at all as they do not own a home.
CEDA is right to link the housing affordability crisis back to the great retirement shortfall, whereby the next generation of retirees have been in the compulsory super system too short a time to have saved a decent nest egg.
Yes, younger people who can’t afford a home are doing it tough (and getting a ‘decent’ job, Mr Hockey, is a facile solution – most are trying to do just that). But those who are currently leaving the workforce to enter retirement, whether voluntarily or not, are the generation who will find out first up how tough life will be on a low, fixed income and high rent, with very little left over for necessities, including energy, nutritious food and transport.
CEDA’s recommendations are bold. I don’t necessarily agree with all of them, but do think they should be put forward to be debated. And such an important policy debate should take place within the scope of a review of our full retirement income system. As David Murray noted in the conclusions of the Financial Services Inquiry, we are still lacking a clear and concise definition of the purpose of the superannuation system.
Until we have agreed goals for super savings and how they combine with an Age Pension, private savings and property, we have no hope of fostering a system that will be fair and sustainable for all. So once again, we urge all political parties to get behind the need to get such an inquiry underway without further delay.
What do you think? Is owning a home key to your retirement security? Or are there other ways of living a comfortable life after work? If you are renting, do you find it difficult to afford other essentials, such as food, utilities and medical services?