Retirement Income Review Supports Equity Release
14 December 2020
The Australian Government’s Treasury Department released an updated retirement income review on 20th November 2020. The report reviews the current retirement income system to both improve the understanding of, and identify areas to improve outcomes for, senior Australians in retirement.
Traditionally, retirees have relied upon superannuation, the pension, and personal savings as retirement income, but with the ageing population, people are spending a significantly higher portion of their lives in retirement, meaning that income sources will need to stretch further.
To facilitate this, the report notes that compulsory superannuation is already scheduled to increase from 9.5% to 12% by 1 July 2025. However, due to the complexity of the retirement system, there is a major misunderstanding when it comes to the use of superannuation. Many have the view that ‘retirement income’ involves investment returns from superannuation balances rather than using their superannuation balance to fund the appropriate living standards in retirement. Furthermore, as superannuation only began in the 1990’s, many do not retire with enough to finance a comfortable retirement.
Policy makers are therefore encouraging more drawdown of superannuation, rather than just accessing the returns solely, and to support the use of equity release products such as reverse mortgages as a solution for the income gap, suggesting that that the family home is an underutilised pillar of retirement funding that could substantially improve retirement incomes and living standards for many Australian seniors.
At Heartland we know that Australians want to live a secure and comfortable retirement, and that having financial products available to retirees that are designed to fit with their lifestyle, should be considered as part of any retirement income plan.
To read the full retirement income review, you can find the report here.
Information provided is accurate as of 20 November 2020 and may change from time to time.