Australia to lead the world in provision of home equity as the third pillar of retirement funding

20 November 2020: Household Capital welcomes today’s release of the Retirement Income Review. Household Capital is Australia’s leading provider of home equity retirement funding. Since launching in 2019, Household Capital has seen a rapid adoption of their services, with over 50 times year on year customer revenue growth. Dr Joshua Funder, Chief Executive Officer of Household Capital, welcomed the Retirement Income Review’s support of house equity access for Baby Boomers. He said, “For most Baby Boomers, voluntary savings outside of superannuation means the equity in their home. Australian homeowners entering retirement today only started to accrue three percent superannuation halfway through their working lives – it’s simply not enough to fund more than 25 years in retirement. 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.” Dr Joshua Funder, Chief Executive Officer of Household Capital, welcomed the Retirement Income Review’s support of house equity access for Baby Boomers. He said, “For most Baby Boomers, voluntary savings outside of superannuation means the equity in their home. Australian homeowners entering retirement today only started to accrue three percent superannuation halfway through their working lives – it’s simply not enough to fund more than 25 years in retirement. 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.”

Australia leads the world by including home equity as the third pillar of retirement funding

The findings of Treasury’s Retirement Income Review show that Australia leads the world in establishing home equity as the third pillar of retirement funding. The federal government has established clear principles according to which Australian retirees can voluntarily improve self-funded retirement outcomes by complementing government benefits and superannuation with access to the $1trillion home equity they have already saved. Household Capital supports the report’s statement that “Housing is an important component of voluntary savings for most people and a major determinant of their retirement outcomes… The home is also an asset that can be drawn on in retirement.”

National awareness needed

“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 said. The Retirement Income Review clearly identified lack of awareness of home equity retirement funding options available to Australian retirees as a key challenge in ensuring adequacy of our national retirement funding system, stating that there is a need to better help Australians understand how they can significantly maximise their retirement savings, particularly in accessing equity in their homes as many retirees don’t realise the enormous potential to unlock voluntary savings through their home. “Home ownership 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. 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.” said Funder. Recent academic research into the home equity funding market by the UNSW Centre for Excellence in Population Aging Research (CEPAR) indicates that over 80 percent of Australians are aware that their home is a significant asset to fund retirement, 43 percent of retirees are open to accessing their home equity to fund retirement and they would draw 13 percent of their home equity to do so.

Importance of home ownership in retirement

The Retirement Income Review clearly set out the multiple roles of the family home in retirement; it provides security, housing and a source of retirement funding, stating, “This report highlights the importance of home ownership in achieving security in retirement such as removing the need for income to pay for rental accommodation and providing an asset that can be drawn on to supplement retirement income.” ‘Australian retirees are worried about their lives. Providing adequate, secure long term funding, including access to home equity, can give our senior citizens confidence in the future” Funder said.

Importance of home ownership in retirement

The Retirement Income Review clearly set out the multiple roles of the family home in retirement; it provides security, housing and a source of retirement funding, stating, “This report highlights the importance of home ownership in achieving security in retirement such as removing the need for income to pay for rental accommodation and providing an asset that can be drawn on to supplement retirement income.” ‘Australian retirees are worried about their lives. Providing adequate, secure long term funding, including access to home equity, can give our senior citizens confidence in the future” Funder said.

Major opportunity to improve retirement outcomes

The Retirement Income Review report identified the major yet-to-be realised potential role for home equity to complement the pension and superannuation in providing retirement funding stating: “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. If this potential were realised, housing would take on an even more important role in the retirement income system.” “This is a massive opportunity to improve retirement outcomes,” said Funder. “Australian retirees enjoy extended longevity – a couple at 65 years old need to plan for 30 plus years in retirement. Around 75 percent of Australian retirees have a strong intention to remain at home throughout retirement and do not want to downsize. There is growing pressure on both the government and individuals to fund in-home care as well as aged care. Collectively, Australian retirees own over $1trillion in home equity; at retirement, median retirees have saved around $200k in superannuation and over $700k in home equity.” –   Ends  – About Household Capital Household Capital is an independent retirement funding provider. Our mission is to help retired Australians ‘Live Well at Home’. We offer retirees responsible, long-term and flexible financial solutions that allow them to draw on their superannuation savings, equity in their home and their Age Pension to achieve their retirement goals while continuing to live at home. We have innovated to provide customers with digital journeys, superb customer service and the lowest available rates. Australian owned and founded in 2016, Household Capital has brought together a wide range of experts to transform the adequacy and sustainability of retirement funding. ME Bank and Legal & General UK are strategic partners and investors. In 2020 Household Capital won an AFR “Top 5” award for most innovative companies in banking, superannuation and financial services. For more information visit www.householdcapital.com.au