Declining home ownership a future pension problem
Australia may have significantly under estimated the degree to which people will be reliant on the Age Pension in coming years because account is not being taken of the nation's declining home ownership rate.
A report presented to this week's Conference of Major Superannuation Funds (CMSF) found that declining levels of home ownership had emerged as a significant threat to the adequacy of Australia’s retirement income system.
The report – written by independent economist Saul Eslake and entitled: No place like home: the impact of declining home ownership on retirement – suggests there is a clear link between deteriorating housing affordability and the adequacy of Australia’s current retirement income system and raises a number of concerns about the impact of Australia’s falling home ownership rates on the retirement wellbeing of future generations.
Eslake said a key concern was the ongoing decline in the proportion of Australians who owned their homes outright, as well as the increase in the proportion of renters.
“If current trends continue, a lot more people will retire with either mortgage debt or having to rely on privately rented housing,” Eslake said. “Increasing numbers of retirees will use some, if not all, of their superannuation to discharge their outstanding mortgage, which in turn, will see more people rely on the Age Pension.”
The report warns that failure to address the ongoing deterioration in housing affordability risks condemning future generations to poorer living standards and higher taxes as Age Pension costs increase.
AIST acting chief executive, Eva Scheerlinck, said the report highlighted the need for governments to consider the wider implications of the housing affordability crisis and raised questions about whether official forecasts of the number of Australians reliant on the Age Pension in retirement in the decades to come were too optimistic.
“The assumption that housing is a ‘fourth pillar’ in our retirement income system has become increasingly dubious," she said.
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