The $20,000 contingency fund

Welcome along folks. It’s YourLifeChoices’ podcast, Mind Your Own Retirement, with me John Deeks and the founder of YourLifeChoices, Kaye Fallick.

We have the CEO and managing director of Household Capital, Josh Funder, talking about some good ways to save you money.

Kaye Fallick: Well, it’s more about contingency funding for retirement, so it’s actually accessing money if you’re running a bit short. I’m excited to hear about that.

John Deeks: Welcome along to Mind Your Own Retirement, Josh.

Josh Funder: Thanks for having me on.

JD: As CEO and managing director of Household Capital, you have got some great tips for our members.

JF: John, we’re really proud to be able to help senior and retired Australians get through COVID-19. The team at Household Capital has been innovating on a home income product, as well as a contingency product, to make sure people have the income and credit they need to get through COVID, but also to plan for long term and their retirement.

JD: How does it work, Josh?

JF: It’s simple. What we’ve done is change our processes to make sure retired Australians can get access to their home equity as easily as they can get access to their other savings. So, we’re now able to deliver home equity savings to Australian retirees as a lump sum $20,000 that you can draw from your home equity, just as you can from your super. Or a regular income stream and we can turn that around in two weeks.

KF: So, that was my question, you have actually fast forwarded the process for people who are in need.

JF: That’s right, Kaye. Small amounts like this aren’t profitable for a company like ours but it’s a service we felt important to be able to deliver, so that people cannot crystallise a loss when their superannuation is down; so that they can maintain their income when their term deposits, or their ample income, or their dividends are way down.

KF: So, this is handy for a self-funded retiree, perhaps, who has taken a hit in terms of rental income or dividends are down this is like a lifeline, if you like, in the short term?

JF: Kaye, it’s really important for self-funded retirees, their income is down, their assets are down and the JobKeeper and JobSeeker packages haven’t helped. And, so, we’ve really got to find a way to come behind self retirees in Australia, and give them access to the savings they’ve got. And we’ve got to learn from the GFC (global financial crisis), where a lot of retired Australians moved their superannuation to cash, or they had to take money out of their investments when they were down. And they never recover. They’re not there to grow back when the markets rebound. So, home equity is a way that you can maintain your retirement funding, maintain your retirement income, but not at the expense of crystallising a loss in the investments that are supporting self-funded retirees

KF: Say I was to access this amount of $20,000, I could then, if I felt in a better position in six months’ time, pay that back?

JF: Yeah, one of the beauties of this approach, Kaye, is that it’s got all of the flexibility and choice retirees need. There are no penalties to repay this in the future, there are also flexible choices to pay interest on it, if you’d like, as you go, or not pay interest. It’s the flexibility that the banks didn’t provide before COVID and they will go back to forcing retirees to pay regular payments on their mortgages after a six or 12-month holiday. This product, you never have to pay the interest payments regularly, but you have the flexibility in choice to meet your needs when you choose to.

JD: Josh, so just lead me though the process to keep it simple. If I contact Household Capital, whether I called them or emailed them, what’s the process from there?

JF: So, John, the process is very simple. We are able to provide personalised service on the phone to retirees to help understand their situation and their needs. A retiree could access $20,000 of their home equity or draw a thousand dollars a month for their home equity, and we’ll be able to assess, approve, and deliver that within two weeks. That’s really important for people as they plan their response for the short term, but also map out their long term. That personalised service and flexibility in choice is still there even though it’s a $20,000 contingency product, or a home income product that we can deliver in that accelerated way.

KF: And, Josh, how is the government, in terms of tax or Centrelink, going to view this loan?

JF: Well, that’s important. Australian retirees are all over Centrelink and it’s important that they are able to feel confident in keeping their pension entitlements. If you have a home income and you use that to meet your ongoing retirement needs, for most people I’m not a tax adviser okay? but for most people it’s not taxable as income and so you don’t trip up the income test. So, if you’re using $20,000 of your home equity to fund your lifestyle or to help others, it’s not usually considered part of the assets test for the pension. And so most customers of Household Capital are able to access their home equity and preserve all their pensions entitlements.

KF: Okay, that’s important. Now, in terms of income, you also offer a regular draw down of retirement income so a product that might allow people to get an extra certain amount per week?

JF: That’s right, Kaye. A simple rule of thumb that retirees can use is 1 per cent of your home per year, or if you take three zeroes off the value of your home and take that down monthly. It’s a very modest amount to draw off your home equity but can make a big difference. So, if you’re living in a million-dollar home in the suburbs of Melbourne or Sydney or Brisbane, and you would like to draw down a thousand dollars a month, that’s a very simple way that we can increase income. Now, if you’re a couple on the pension, you might get $34,000 a year, and most of that goes on your rent, on your utilities or your rates, insurances and your food. So, an extra $1000 a month can make a big difference to the flexibility you’ve got, the confidence and also some of the nicer things in life that just make retirement fun and really enjoyable for you and your family.

JD: Josh, where can people go to find out more?

JF: Well, the first place to go, John, is to our website and also call 1300 622 100. Our personalised customer service reps are ready and waiting, and can take people through to meet their own needs with their own home equity savings.

JD: And, Kaye, I think we are going to be able to put some actual case studies up?

KF: Yes, so I know Household Capital is sometimes hard to understand, so we’ve got a couple of case studies that explain how both of these products work and Josh has offered, kindly, to give us that information and we will pop it up on the website.

JD: So, go to YourLifeChoices and you will see all the information there and, of course, also another link to Household Capital. And, Josh, we do thank you for your time and a wonderful initiative from Household Capital.

JF: Kaye and John, thanks for having us again.

JD: Term deposit rates have plumbed to new depths, dividends are being slashed, and income streams from property investments have dried up. Has your retirement income been impacted? Household Capital can help you draw on the savings in your home, your own household capital, to provide you with a fast-tracked income stream or $20,000 contingency fund to help you through these challenging times. To find out more, call 1300 622 100 or go to

YourLifeChoices Writers
YourLifeChoices Writers
YourLifeChoices' team of writers specialise in content that helps Australian over-50s make better decisions about wealth, health, travel and life. It's all in the name. For 22 years, we've been helping older Australians live their best lives.
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