With the 2015 Intergenerational Report predicting that Australians will live longer and be poorer over the next 40 years, Bendigo Bank and Homesafe Solutions have called on the Federal Government to consider better ways for Australians to support themselves in their old age.

The Intergenerational Report highlights financial issues facing an ageing population with an increasing life expectancy.  

Women’s life expectancy, for instance, is predicted to increase from 93.6 years to 96.6 years by 2055.  Clearly the financial resources needed to support retirees for potential periods in excess of 30 years will need to be very significant. 

Fortunately the very high level of home ownership in Australia by retirees is a potential source of funding which could be used to augment retiree’s incomes to fund a dignified retirement. 

As the report highlights, retirees can expect to have an ever improving life expectancy and as a result products that enable retirees to access the wealth tied up in their homes will need to have regard to the ever increasing longevity.

Homesafe Managing Director Peter Szabo said hundreds of thousands of retired Australians had equity in their homes that they could utilise if they could minimise the risk and have some certainty of the eventual outcome.

While reverse mortgages can continue to consume equity in the family home, Peter Szabo said 

Bendigo Bank and Homesafe offers Australians a unique debt-free home-equity release mechanism, which transfers the increasing longevity risk from the homeowner to Homesafe.

Homesafe enables senior homeowners to sell a fixed proportion in the future sale proceeds of their home in exchange for an up-front cash amount.

Homesafe can become a key part of the “fourth pillar” of the retirement income system (namely home-equity), and supports the other three pillars which are: the age pension, compulsory superannuation and voluntary savings (including non-compulsory superannuation).

Homesafe is a good way of helping Australians have enough cash resources for their retirement.

Peter Szabo said: “Homesafe is an idea the government should consider more closely. Homesafe is a perfect support for the existing ‘three pillars’ of the retirement income system.”

“It would be of immense help to those on the age pension, compulsory superannuation and voluntary savings schemes, including non-compulsory superannuation.”

It is recognised that the equity senior Australians own in their homes represents a significant amount of savings and that senior Australians could have a better quality of life if they had the ability to use that equity without undue risk.

Homesafe provides certainty, which is not available with debt products such as reverse mortgages because the risks are borne by Homesafe and not the homeowner. 

With Homesafe, senior homeowners can continue to live in their home secure in the knowledge that it is up to them when they decide to sell the property. It is only when the homeowner sells that Homesafe is paid their share of the sales proceeds.

Unlike reverse mortgages, the homeowner always gets to keep the share they have not sold because it is Homesafe taking the risk on property prices and longevity.

Homesafe Managing Director Peter Szabo called on the Government to examine innovations, such as the 10-year-old Homesafe product, as a mechanism that Australians can use to release equity in a safe and transparent manner.

Peter Szabo said the value of residential property in Australia was an estimated to be in excess of $5 trillion at the end of 2013. A significant proportion of those properties were owned by retirees.

He said a meaningful proportion of that wealth could be released to help with retirement funding, easing the burden on governments.