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Home Ownership – The fourth pillar of retirement

In Australia we have a three-pillar retirement system:

1)     The government Age Pension

2)     Compulsory Employer Superannuation

3)     Tax advantaged voluntary superannuation savings

Retirees in Australia utilise all or some of the three pillars to fund their retirement and transition into retirement.

Retirement is also in some instances supplemented with non-super personal savings and downsizing the residential home.

Concern for ensuring adequate levels of wellbeing in retirement has been a primary objective of the retirement income system in Australia since the introduction of Age Pension in 1908. The Age Pension is at least a minimum safety net. It is a form of non-contributory social insurance.

Currently, according to the Association of Superannuation Funds of Australia (ASFA), superannuation assets in Australia stand at $2.2 trillion. This is one of the largest superannuation pools in the world.

According to The Household, Income and Labour dynamics in Australia Survey (Hilda Survey2016) home ownership among persons age 55-64 years has declined from 75.1% in 2002 to 72.9% in 2014.

The latest HILDA survey also suggest a declining home ownership rate amongst retirees in Australia . There is also a tendency for people to use their superannuation savings to settle their outstanding mortgages the effect of this will be less money in their superannuation account and a greater reliance on the age pension.

The general decline in home ownership is also significant as people renting will have higher housing costs in retirement – this will result in lower disposable incomes and higher poverty rates.

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