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Quality of retirement does not depend on super balance: Bragg

The Senate Economics Committee has handed down its Interim Report into existing and proposed super for housing policies.

Chair of the Senate Economics Committee Senator Andrew Bragg said the Inquiry was recalibrated to assess how policy could improve retirement outcomes by letting Australians use their superannuation to purchase a home.

"In the course of our inquiry, it has been made clear to the Committee that having a secure retirement depends heavily on your home ownership status, not your super balance," Bragg said.

"We looked at existing and proposed super for housing policies to determine what can be done to help Australians into a first home."

The Committee made two recommendations in particular; to allow first home buyers to access more of their super than has been previously proposed, with options for a higher maximum withdrawal cap and without a maximum threshold.

The Committee suggested either increasing the cap to $100,000 or $150,000, or removing the cap altogether.

"Rampant inflation under Labor means that the Committee has had to re-examine previously proposed thresholds and caps, to ensure the policy can be effective for first home buyers," Bragg said.

The Committee received evidence from actuaries Michael Rice and Jonathan Ng that suggested a much higher cap would be appropriate so that first home buyers would have enough flexibility to withdraw the amount required to form a deposit.

Rice and Ng found that for a 35-year-old who used super to form a 20% deposit on a $800,000 unit, the value of that equity in the unit in today's dollars would be worth $1.2 million 30 years later at the point of retirement. This is compared to only $319,000 had it remained in superannuation.

However, according to Australian Retirement Trust, the average 35-year-old woman has around $76,900 in super, and the average man has around $107,700 in super. A 20% deposit on an $800,000 home is $160,000.

In addition, modelling by Super Members Council found removing the cap on using super for housing would push capital city house prices up by $75,000.

The Committee also recommended that first home buyers who have used the proposed scheme to purchase a first home should be allowed to use the proceeds to purchase their next home rather than having to re-contribute the withdrawn amount immediately back into super.

"By eliminating red tape, the policy can work better for Australians who wish to sell their first home and relocate," Bragg said.

In addition to proposing an increased cap, or no cap at all, the Committee said it is giving consideration to:

  • Expanding and simplifying the Super Saver Scheme
  • Using superannuation as eligible collateral for a home loan
  • Have APRA investigate the feasibility of superannuation-based shared equity schemes
The Committee is now also examining other policies to advance home ownership in retirement, such as letting Australians use their superannuation as a mortgage offset.

Read more: Senate Economics Committee SenatorAndrew BraggJonathan NgMichael RiceAustralian Retirement TrustAPRASuper Members CouncilSuper Saver Scheme