Katja Hanewald and Hazel Bateman
Introduction: In Australia, as in many countries, housing wealth is a key component of retiree household savings. This was underscored by the 2020 Retirement Income Review (Australian Treasury, 2020), which reported that for most households aged 65 and over, the family home is their largest asset. The review found that using superannuation assets more efficiently and accessing equity in the home can significantly boost retirement incomes without the need for additional superannuation contributions. Based on modelling and projections, the review concluded that using relatively small portions of home equity can substantially improve retirement incomes and that releasing home equity can boost retirement incomes with a modest impact on debt.
Australian retirees have several equity release options to access the wealth tied up in their homes without having to sell the property. The government’s Home Equity Access Scheme (formerly Pension Loans Scheme) allows older Australians to supplement retirement income by accessing home equity, with repayment deferred until the home is sold. Similarly, reverse mortgages offered by different providers allow homeowners to borrow against their home equity, with the loan repaid upon selling the property, relocating, or at the borrower’s death. Other options include home reversion schemes, where a portion of the home’s equity is sold for either a lump sum or regular payments, and shared appreciation agreements, which provide payments in exchange for a share in the property’s future sale value. While these options are increasingly recognised for their potential to improve financial flexibility in retirement, their overall uptake remains modest, suggesting a need for greater public awareness and understanding.
This paper aims to provide background information, summarise recent research in this area and identify policy suggestions.
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