The SMSF Association has suggested using equity from home ownership in conjunction with superannuation savings may be an underexplored strategy to help fund retirement lifestyles.
Speaking at the industry body’s National Conference 2024 in Brisbane today, association head of advocacy and policy Tracey Scotchbrook noted the retirement phase of superannuation consultation paper released by Treasury in December last year had sparked some interest in this approach.
“There’s so much focus on pension drawdowns that there’s not a holistic view of what people are actually using as a source of income for their retirement, [for example], if it’s personal savings that they’re consuming first before their superannuation,” Scotchbrook said.
“One interesting trend that actually came out of discussions was around the use of home equity schemes.
“The home equity scheme makes sense upfront rather than later. Whilst [retirees are] in the family home [they can use equity] to provide the level of income that they need at that earlier stage of retirement when they’re typically drawing down more, knowing that at some point the property will be sold.
“It means that the superannuation can then fulfil its role and provide the longevity piece and provide the cash for aged care and [other expenses].”
Additionally, she believed there was still much to unpack from the government’s review of the retirement income system.
“What was interesting is [there] was a lot of focus about people hugging the minimum drawdown and what were the reasons behind that,” she stated.
“We had the transfer balance cap come into place. Of course people are going to be hugging the minimums because they want to preserve as much as they can in the tax-free pension phase. But I think there’s more to the story than that.
“[For example], when we look at the ATO statistics that were released just a couple of weeks ago for the 2022 year, the breakdown between income stream withdrawals from SMSFs and lump sums are about a 54 per cent to 45 per cent split.
“A lot of it is coming out as income stream, but almost half of that is coming out as lump sum. So part of that is going to be the transfer balance cap management.”