The Federal Treasurer, Scott Morrison has directly referenced the frequency with which superannuation lump sums are being used to pay down mortgages.
While his address to the Australian Housing and Urban Research Institute prompted more debate around allowing first home-buyers to access their superannuation to form a deposit, it was the Treasurer’s comments around lump sums which are more likely to resonate with financial planners.
Barely a month out from the Federal Budget, Morrison noted that Australian homeowners who were not encumbered by large housing debt as they entered retirement would have their pension or superannuation incomes go much further to meet their many other costs of living.
“Similarly, those who own their own home are subject to a higher assets test – excluding the family home – for accessing the age pension,” he said, noting that “the proportion of Australian households that own their own home has fallen marginally from 71 per cent to 67 per cent over the last two decades”.
Morrison said it was concerning that the decline in home ownership and increase in mortgage costs had been most pronounced in “family-forming households” and that Australians were increasingly carrying into their retirement larger mortgage debts, or were renting.
“The proportion of home owners aged over 45 with a mortgage has increased and, according to the Productivity Commission in 2015, the most frequent use of superannuation lump sums was to fund housing, including paying down mortgages,” he said.
Morrison referred to recent industry funds sponsored research undertaken by independent economist, Saul Eslake stating that it was likely that an increasing proportion of new retirees would use some or all of their accumulated superannuation savings to discharge their outstanding mortgage debt and that “an increasing proportion of retirees would be living in privately rented housing, spending a higher proportion of their income on rent”.
“These are the facts and they represent a problem that needs to be addressed in the broader national interest,” he said.