'Abandoned' SMSFs call on government for help

Incomes of self-funded retirees are being clipped – or even lost – as the economic fallout of COVID-19 results in lower dividend payments and investment property tenants who can no longer pay rent.

Many self-funded retirees, who are not reliant on the age pension, are being forced to dip into their cash savings or crystallise investments that have lost value in falling stock markets.

John McCallum, National Seniors chief executive, said: “Retirees are very anxious that there are not going to be self-funded retirees for much longer.”

One of these retirees, a 74-year old man who did not wish to be named, said income from his two shops, which he purchased 20 years ago to fund his retirement, had stopped.

The former self-employed father of four said the hairdresser and cafe lessees both told him they could no longer afford to pay rent and closed their shops.

“A lot of my retired friends also rely on rental income and find themselves in the same position. I have gone from financial security to insecurity in 10 days,” he said.

It would be hard to sell the properties or find replacement tenants because of weak property demand, a ban on evicting tenants and struggling retail markets, according to property specialists.

Natalie McGreevey has written to Federal Treasurer Josh Frydenberg on behalf of her father and his friends highlighting their plight and asking for some temporary assistance for the duration of the pandemic.

“They are falling through the cracks,” Ms McGreevey said. “Their income has gone overnight.”

She said the retirees are too old for employment benefits but their property ownership disqualifies them from the age pension.

There are more than 1.5 million households with at least one investment property, according to Australian Taxation Office analysis.

Professor McCallum said the problem increases the longer the pandemic runs and that many self-funded retirees are complaining that they feel “abandoned” by the government.

“There is a concern that their struggle to make ends meet is not being recognised,” he said.

According to recent research, more than half of 66-year-olds were not accessing the age pension in December 2018 because their assets and income were too high, while 20 per cent were on a part pension. Only 25 per cent were drawing a full age pension.

National Seniors and retirement income specialists, such as Challenger, are researching what changes have happened since the onset of the virus and collapse of many traditional retirement income sources.

Josh Funder, chief executive and founder of Household Capital, which offers reverse mortgages, said there has been a 50 per cent increase in calls from self-funded retirees since the pandemic outbreak.

Mr Funder said the retirees understand investment returns are down and want to use their home equity, which ranges from $800,000 to $7 million, to help get them through the crisis.

Reverse mortgages allow retirees to draw 15 per cent of household equity at 60 and increase withdrawals by 1 per cent a year for the next 20, or a cap of 35 per cent.

 Original article on The Australian