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24th of June 2016

Home equity release crucial to fund retirees with insufficient superannuation balances

MEDIA RELEASE – 23 June 2016

Financial concerns are escalating amongst pre and current retirees as the reality of underfunded superannuation balances and inadequate savings is becoming a reality for far too many mature age Australians said Homesafe Solutions MD and Founder Mr Peter Szabo. 

Telling recent surveys have revealed that many older Australians expect to be worse off than previous generations and retirement security concerns have become a major issue.

Commenting further, Peter Szabo said, “In response, many workers have resolved themselves to deferring retirement and working to age 70 and beyond in the hope that small superannuation balances and savings nest eggs can be bolstered. 

“Unfortunately, returns from superannuation are low and with falling investment rates combined with the impact of fund manager fees are not painting a positive outlook for most of these people”.

Australians who have or are about to retire with insufficient superannuation balances will fall into one of two camps – 1) those with balances still owing on the home mortgage; and 2) those with no mortgage debt over the family home.

However, each group is united in that they are living in a house that isn’t counted for in the pension, and in which untapped equity can be accessed without the need to sell, downsize or enter into a reverse mortgage.

Added to the list of financial woes, many experts are predicting life expectancy for today’s 65 year olds to be well into their late nineties for males and females. 

This should be great news, except for a vast number whose financial resources and assets will evaporate long before reaching these numbers.

“The extended impact of the low investment return environment has brought to the fore the importance for those retiring with an outstanding mortgage of the value tied up in their family home”, said Peter Szabo. 

“Many will respond with a knee jerk solution such as selling the family home and downsizing or using savings and investments to repay the mortgage when equity release using the proceeds to repay the debt would have been a much better option”. 

A further consideration for those whose superannuation contributions have stayed within the concessional cap, the proceeds can be paid into super as a non-concessional contribution within the lifetime cap of $500,000 and produce tax-free retirement income.

Pointing to the recent Federal Budget, Peter Szabo said the  announcement allowing people aged 65 to 74 to increase their retirement contributions was a very welcome initiative as it will allow retirees to lift their superannuation balances.

“Financial intermediaries and advisers can expect demand for their services to grow enormously and they need to ensure they provide a comprehensive list of options for retirees, including equity release which continues to be overlooked by many practitioners in favour of reverse mortgages or selling/downsizing”.

“Homesafe’s equity release is a far better and less stressful alternative to address many elderly Australians financial challenges.  By releasing some of the stored value in the family home and utilised to provide greater long term benefit, seniors will be able to live stress free in a home that suits their social and community support needs”, concluded Peter Szabo.