Last Friday, the Government released its long-awaited Retirement Income Review which makes a number of findings that could be used to guide Australia’s future retirement system – and retirement villages and land lease communities could be the real winners.
The 648-page Review – chaired by former IMF director and senior Treasury bureaucrat Michael Callaghan with Carolyn Kay and Deborah Ralston – examined a range of issues including the Age Pension, compulsory superannuation and voluntary savings.
The key section for village operators however is the section on the family home.
The report finds that while the Age Pension provides a strong safety net and reduces income inequality, the complexity of the superannuation system and low financial literacy means most retirees aren’t making the most of their assets.
It concludes that older Australians would enjoy a more comfortable retirement if they accessed the equity on their homes and drew down on their superannuation.
“If this potential were realised, housing would take on an even more important role in the retirement income system,” it reads.
Historically, older generations have been reluctant to spend down their assets because of the ‘longevity risk’ – the fear that you will outlive your resources.
But the findings give the Federal Government a strong incentive to put more policies in place to support home ownership and tapping into home equity, for example, reverse mortgages.
They also support the village proposition – sell the family home and downsize to a village.
This will free up cash reserves to live on and provide residents with control of their finances as village budgets are set.
There are also the benefits that come from pooling resources such as access to community facilities.
With the Royal Commission expected to recommend that Australians contribute more to their aged care – and more care services to be delivered at home – this cash could also be used to fund home care.
A win-win for all?