The federal government must protect income-poor retirees who want to access equity locked in their family home, the Actuaries Institute says, amid rising concern that superannuation or pensions won't be enough to maintain a comfortable life in retirement.
Existing legislation should be reworked to make it easier and safer for retirees to boost their retirement income by accessing the equity in their family home, the Actuaries Institute's new discussion paper Unlocking House Wealth says.
"Older Australians face a dilemma - they are often asset rich, but income poor," Actuaries Institute president Lindsay Smartt said.
The Institute acknowledges that it's an emotional issue: many people don't see the family home as an asset to be used, but rather as something to be left to children or other relatives.But, "if they choose to, retirees can achieve a better standard of living if housing wealth is considered an integral part of their retirement plan," Mr Smartt said.
"The overriding consideration of the Institute is that if retirees want to access their housing equity, it should be easy and safe to do so."
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The discussion paper urges policymakers to consider several options, including stamp duty relief, the flexibility to unlock part of a property's equity, and the introduction of a value cap for the family home under the Age Pension means test, aimed at wealthy retirees.
It also proposes a review of banking practices that limit providing bridging finance to elderly people to make it easier for them to downsize, and suggests the Age Pension means test for homeowners be differentiated from that for non-homeowners.
The Institute also wants better regulatory protection for the elderly to prevent financial abuse.
The Organisation for Economic Co-operation and Development estimates that Australians aged over 65 have the second highest income poverty rate after Korea, out of OECD member countries.
Currently, couples in middle Australia need to supplement their superannuation with the age pension just to meet the Association of Superannuation Funds of Australia comfortable level of retirement.
Still, 85 per cent of older Australians own their own home, largely thanks to tax policies that favour home ownership, according to Catherine Nance, a partner at accounting firm PwC.
She also oversaw the group that compiled the report.
The total value of Australian residential property is estimated to be $5.76 trillion, of which $926 billion is owned by older Australians.
