Aussies need to start using the family home to fund retirement: report
The home is an untapped asset that can be used to fund retirement, urges the retirement income review.
Australia's current retirement system consists of three pillars: the age pension, superannuation and savings, which includes the home.
Typically, retirees lean predominantly on the age pension, super and other liquid assets to fund retirement. But home equity remains untouched.
"We need to help Australians understand how they can significantly make the best use of their retirement savings, including the equity in their homes" the report says.
Making use of home equity means reverse mortgages, equity release schemes, home equity loans or downsizing.
Household Capital CEO Josh Funder welcomes the above suggestions.
"Homeownership is an integral part of Australian wealth creation and it should also be widely available for Australians to voluntarily draw on their wealth to fund their retirement," he says.
"We have the technology to efficiently deliver home equity retirement funding across Australia. The key is to establish national awareness of the opportunity to make the family home both the best place to live and the right way to fund retirement."
And it's not as if Aussies are unaware that the home can be used to fund retirement.
Research by the UNSW Centre for Excellence in Population Aging Research (CEPAR) shows that more than 80% of Australians are aware that their home is a significant asset to fund retirement, 43% of retirees are open to the idea of using home equity to fund retirement and, if they did, would draw 13% of their home equity to do so.
Separately, the home can be used as collateral to access the government's Pension Loan Scheme.
"If you are currently receiving the Age Pension or similar seniors' welfare payment (or a DVA pension) and you own property in Australia, you will most likely meet the eligibility criteria," says Pension Boost CEO Paul Rogan.
"The government recently enhanced this Scheme, in part, to provide liquidity to a wider group of retirees who prefer to keep living in their homes but need more income to take the stress off meeting their regular bills."
At the end of the day, it's all about improving the quality of life for retirees.
"Available home equity can double the amount of their superannuation and help fund their retirement. Accessing home equity can offer a responsible, long-term solution to allow current retirees to boost their retirement funding," says Funder.