![Younger workers face paying significant rent, which will put more pressure on their super savings.](/content/dam/images/g/h/n/9/a/8/image.related.afrArticleLead.620x350.gv2rdc.png/1490076814358.jpg)
Superannuation funds face a big enough challenge trying to get millennials interested in saving for their retirement without giving them the option of diverting those funds to buy a house.
Three key players in the superannuation industry told the annual ASIC forum that any move to allow first home buyers to raid their super funds to buy a property would be a bad idea as longer lifespans and the higher cost of living meant every cent would count. Existing savings rates were already inadequate for a comfortable retirement.
The superannuation industry has made it clear it will fight any move by the government to allow first home buyers to use retirement savings as part of a housing affordability package in the May budget.
The catch-22 though is that if young people cannot afford to buy a house, they are going to need to put more money aside to pay exorbitant rents in their retirement. When the current superannuation system was established, that was based on the assumption many retirees would own their own home.
Michael Dwyer, chief executive of First State Super, says first home owners in 1994, two years after the super guarantee arrived in Australia, had one of the highest rates of home ownership in the OECD – about 70 per cent. First home buyers represented 20 per cent of all owners but this has fallen to less than 10 per cent by 2017.
While older workers have the security of a roof over their heads when they retire, younger workers face paying significant rent, which will put more pressure on their super savings. Dwyer says Sydney retirees renting will need more than $1 million in super savings.
"We need to start the conversation with our members very early in the piece. There is plenty of research around that says the average person going into retirement, even if they have a healthy super balance, if they have no roof over their heads and have to pay high rent, the chances of them falling into poverty are much greater than if they had a home."
Educate young people
Andrea Slattery, chief executive of the Self Managed Super Funds Association, says the move will inflate home prices and create other problems. She also believes it would rob Australia of up to $9 trillion of future investment opportunities in things such as infrastructure over the next 15 to 20 years.
"It is very tempting to say to a young 25-year old you can have this money now. That in fact inflates the home prices and creates its own problem," Slattery told the forum.
Sally Loane, chief executive of the Financial Services Council, does not support diluting retirement savings to solve the housing affordability problem. She also believes the industry needs to do more to educate young people about the importance of saving for their future. Loane says digital platforms are a crucial way for the industry to educate younger people – who spend large amounts of their lives on iPads or smartphones – about superannuation.
The inadequacy of savings means the industry will have to do more to educate young people to contribute more to their superannuation. Dwyer says the average 60 to 64-year-old man has $292,510 in savings, while the average woman of the same age has $138,154. For a comfortable retirement, it is estimated a couple will need $640,000 or $540,000 for a single.
Diverting superannuation funds into housing will deplete that precious resource but if they do not buy property, young people will have to save more to pay for their rent anyway.
michael.smith@fairfaxmedia.com.au