Retirement
Retirement Income Review cornerstone ‘not for everyone’
Despite being the cornerstone of the Retirement Income Review, an expert has highlighted that downsizing and withdrawing equity from a property might not be the solution for all older Australians.
Retirement Income Review cornerstone ‘not for everyone’
Despite being the cornerstone of the Retirement Income Review, an expert has highlighted that downsizing and withdrawing equity from a property might not be the solution for all older Australians.
The Retirement Income Review has shown that Australian pensioners have a strong safety net in property that can be used to reduce income inequalities, albeit the complexity of the system might be holding people back.
The report suggests the around 76 per cent of all seniors owning their property outright could enjoy a more comfortable retirement through accessing the equity in their home or by drawing down on their superannuation balances.
“Home owners also have the opportunity to access the equity in their home to supplement retirement income and manage longevity risk, although few currently do so,” the review said.
“If this potential were realised, housing would take on an even more important role in the retirement income system.”
Despite the release of the report only being the start of a lengthy consultation process, with any significant changes or reform unlikely until mid-2022, industry experts have still hit out against the findings.
“Downsizing is not a panacea for every retiree needing more cash to live on,” argues Pension Boost founder Paul Rogan.
He pointed to research by the national seniors organisation that showed most older Australians prefer to live in their homes rather than downsizing as a way to release equity to fund retirement.
The resultant dislocation caused by moving to a new area, away from their familiar surroundings and network of friends, is stressful.
“Downsizing may also have an adverse impact on seniors’ age pension entitlements, as any large amounts of cash freed up will be included in the means tests” said Mr Rogan.
Alternatively, Mr Rogan explained to retirees that the government has a Pension Loans Scheme which does not affect their age pension or self-directed pensions and allows them to continue living in their homes.
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