'Secret plan' to force retirees to use their home to fund retirement

Federal Treasurer Josh Frydenberg has backed the Retirement Income Review findings that retirees should use their savings more “efficiently” – which would include relying on lower super contributions and selling or using the family home to fund retirement.

He confirmed the government’s ‘secret plan’, as Industry Super Australia (ISA) chief Bernie Dean describes it, was revealed through the use of the “efficiency” code word. Mr Dean also expressed concern the government was bowing to the extreme elements of the backbench should he follow through on the scheme to shelve the legislated super increase.

He says if the government breaks its election promise on super, it will leave the average 30-year-old couple with $170,000 less at retirement.

To make up for the shortfall, a government review, superannuation minister Jane Hume and now the Treasurer have indicated retirees should sell down the home.

The Treasurer also said he would consider making Australians sacrifice their retirement savings due to the economic conditions.

That sacrifice would be in the form of reduced super contributions.

Read more: Senator urges retirees to use their savings ‘more efficiently’

Speaking to the Council on the Ageing Australia (COTA) last week, Mr Frydenberg claims the government is more focused on Australians’ quality of life now than on the quality of their retirement. He said the super increase would result in lower wages for employees. 

“For a median earner, increasing the superannuation guarantee could increase their retirement income by $33,000, but lower their working-life income by around $32,000,” said Mr Frydenberg.

“Anybody who denies that there is a trade-off is effectively a ‘flat-earther’.

“Without compulsory superannuation, many Australians would not save enough for retirement,” he said, but added that it didn’t help them get through any current financial difficulty or improve their living standard in their working years.

Mr Dean says this line of thinking is “rank hypocrisy”, given that MPs all pocket more than 15 per cent in super on top of generous taxpayer funded wages.

“This cruel plan to cut super would be a disaster for Australians who would retire with far less, then may be forced to sell the family home – the place that holds decades of memories – or be far more reliant on the pension,” he said. 

“Be wary of the politician demanding retirees spend their own money more efficiently – they want you to cut super and sell your family home.”

“Most Australians – who are not lucky enough to be on 15 per cent super like MPs – are not leaving huge bequeaths to children.”

One way Australians could improve their retirement situation was earlier home ownership, said Mr Frydenberg.

Read more: ‘Government attacks on super deliberate and calculated’: Labor

“We are continuing to deliver measures to allow more Australians to buy their first home sooner,” he said.

“We are going to be looking at some other opportunities as well … about home ownership and superannuation.”

One of these measures could be allowing younger Australians earlier access to super to help them into the property market.

And yet pouring super onto the overheated housing market will make the nation’s retirement savings go up in flames, says Mr Dean.

A proposal to allow first home buyer couples to take $40,000 for housing deposits could hike median property prices by 8-16 per cent in capital cities, according to ISA analysis.

The analysis shows that property prices would skyrocket in all state capitals, but the impact would be most severe in Sydney, where the median property price could lift a staggering $134,000.

“This just confirms what experts have been saying for ages – that throwing super into the housing market would be like throwing petrol on a bonfire. It will jack up prices, inflate young people’s mortgages and add billions to the Age Pension, which taxpayers will have to pay for,” said Mr Dean.

The proposal being pushed by a backbench MP would lead to many potential buyers being locked out of the supercharged market or lumped with far bigger mortgages. These couples would be left with little savings and only the pension to rely on – contrary to the government’s intentions.

Taxpayers would then be forced to pay billions more into the Age Pension, which could lead to higher taxes, says the ISA analysis.

“There is no free lunch in super and for every $1 taken out of super by someone in their 30s, the taxpayer must pay up to $2.50 more in increased pension costs when they retire,” states the ISA, which claims that the real winner would be the banks who would reap the windfall of the inflated mortgages.

“We need sensible solutions – like boosting the supply of affordable housing which will bring prices down and get young people into a home without lumbering workers with higher taxes in the future.”

While superannuation minister Jane Hume may be in favour of selling the family home to fund retirement, last week she joined a chorus of economists, housing experts and a Retirement Income Review report author to caution against raiding super for home loans.

Read more: Super funds go to war with the government

“We welcomed the minister pouring cold water on this idea very publicly last week and would encourage the Treasurer and the PM to back her up and show that the government is not beholden to extreme elements within its ranks,” said Mr Dean.

What do you think of the government’s ‘secret plan’? Should the family home be considered a pillar of retirement income? Do you agree that super should be used to help younger people into the housing market?

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Written by Leon Della Bosca

Leon Della Bosca has worked in publishing and media in one form or another for around 25 years. He's a voracious reader, word spinner and art, writing, design, painting, drawing, travel and photography enthusiast. You'll often find him roaming through galleries or exploring the streets of his beloved Melbourne and surrounding suburbs, sketchpad or notebook in hand, smiling.