Throwing out the chestnuts
Every two years or so, someone raises that hoary old chestnut about first home buyers' being able to access their superannuation to help provide a deposit sufficient to obtain a home loan.
Thankfully, it is a hoary old chestnut which is usually ignored by serious politicians and promptly consigned to the policy waste-paper bin.
In 2015, however, the Federal Treasurer, Joe Hockey, has chosen to put the superannuation/mortgage chestnut on the Government's menu for policy discussion barely seven weeks' out from the tabling of the Federal Budget.
Of course there is nothing wrong with Government ministers opening the door for discussion of particular issues, and Hockey's comments regarding the use of superannuation to help fund first home buyer mortgages need to be viewed in the broader context of the findings of the Intergenerational Report.
However that same Intergenerational Report left no doubt that Australia continues to face the significant problem of an ageing population and significant doubts that the nation will have a tax base capable of underwriting the consequent demands on the age pension.
"What financial planning clients need right now is policy certainty around superannuation — something which both the major parties promised before the last Federal Election."
In other words, Australia's policy priority should be encouraging people to contribute to ensuring retirement income self-sufficiency to relieve pressure on the age pension over coming decades. As things stand, the major vehicle for achieving this is superannuation.
And what would be the effect of allowing first home-buyers access to superannuation to help fund their deposit? A diminution in their super account balance at a peak time in the members' earnings cycle, an erosion of the tax concession/preservation equation and the likelihood of greater pressure on the age pension.
Instead of canvassing something as spurious as using superannuation funds to fund mortgage deposits, the Treasurer would have been better served clearly communicating the need for people to embrace incomes streams in preference to taking lump sums — something which was positively recognised in both the Intergenerational Report and the Financial Systems Inquiry recommendations.
As any good financial planner might have told Mr Hockey, there will always be those people who retire with superannuation accountant balances that are so low that their best option is paying down the mortgage and contacting Centrelink, but there are also those who too readily fritter away substantial lump sums and then seek to rely on the age pension.
In short, there is nothing more critical to Australia than thoroughly sorting out the post-retirement equation, and the last thing that needed injecting into the debate was the distraction of that hoary of chestnut of superannuation being used to fund home purchases.
What financial planning clients need right now is policy certainty around superannuation — something which both the major parties promised before the last Federal Election.
In the past 18 months discussion around superannuation has meandered from the sustainability of tax concessions to an apples and pears comparison of super fees. It is time to throw out the chestnuts and get the debate focused on making superannuation the right retirement vehicle for Australia's future.
Mike Taylor
Managing Editor
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