Australians should be allowed to withdraw the entire balance of their superannuation fund to pay their mortgage, a leading Liberal MP has said.
The Coalition campaigned at the last election to allow young Australians buying their first home to withdraw $50,000 from their retirement savings to fund a mortgage deposit.
Since Labor came to power in May 2022, the average borrower is paying $19,000 more on their mortgage each year, but those who are in arrears or even default cannot immediately access their retirement funds due to existing severe hardship rules.
As the cost of living crisis strains borrowers, Opposition home ownership spokesman Andrew Bragg wants to allow Australians to withdraw their entire superannuation funds to pay off their mortgages, suggesting the Liberal Party could make it an election issue.
“We are looking at that; it is not our policy yet,” he told Daily Mail Australia.
Senator Bragg gave the example of a homeowner in his 40s with an average mortgage of about $600,000 who was allowed to use $200,000 from his retirement fund to offset the loan.
“That would make a huge difference in the interest they would pay you,” he said.
‘So you’re paying more than the principal and getting closer to homeownership.
‘The key determinant of your success in retirement is not your retirement balance, but your homeownership status.’
A senior Liberal Party official says Australians should be allowed to use their entire superannuation balance to pay off their mortgage (pictured, an auction in Sydney)
A Senate economics committee is exploring the idea of allowing Australians early access to their retirement funds.
The inquiry, ‘Improving consumer experiences, choice and outcomes in Australia’s superannuation system’, is due to publish a report next month.
An interim report, released in May, recommended allowing Australians to set up a mortgage offset account linked to their superannuation fund, so borrowers could make monthly repayments from their retirement savings rather than draining their bank savings.
“There are many Australians who have a decent-sized surplus balance that they would like to offset against their mortgage, which would reduce their interest payments and bring them closer to home ownership,” Senator Bragg said.
‘There are several ways to achieve this, from full withdrawal to retention in a legislated clearing account.
“One of the things that worries me is that there are people forced to pay high commissions to their pension fund and, at the same time, pay high interest to a bank.”
Current hardship provisions only allow Australians to access superannuation funds early if they receive Centrelink benefits, have lost their job or have a serious illness.
Senator Bragg, who chairs the economics committee, argued that existing early access rules were too rigid and meant Australians could only buy a home with help from their parents.
“It’s a very rigid system. I don’t believe in the idea that we have to force everyone into a straitjacket,” he said.
As the cost of living crisis strains borrowers, Opposition home ownership spokesman Andrew Bragg wants to allow Australians to tap into their entire superannuation funds to pay off their mortgage, hinting the Liberal Party could make it an election issue.
‘If it is now the Bank of Mom and Dad that is going to determine housing outcomes, we are in very dangerous territory.
‘We are increasingly seeing housing outcomes being determined by parental wealth and that is very bad, I would say very un-Australian.
‘In the absence of the Bank of Mum and Dad, super funds are likely to become people’s largest source of capital.’
The previous coalition government allowed Australians to access up to $20,000 of their superannuation fund in two $10,000 instalments in the first and second half of 2020 as Covid lockdowns forced businesses to stop serving customers in person.
Labour opposes early access to pensions, arguing that this would deplete retirement savings and make older people more reliant on the age pension, which becomes available when most people turn 67.
Australians born since July 1964 cannot access their superannuation until they turn 60.
The Reserve Bank’s 13 interest rate hikes since May 2022 have caused monthly mortgage payments to rise by 68 per cent, with the cash rate now at a 12-year high of 4.35 per cent.
This has caused payments on the average $600,000 mortgage to rise from $2,306 to $3,868 per month, with annual payments now $18,744 higher than just over two years ago.
But the average Australian has $164,126 in superannuation, tax office data showed.
The Labor government of Prime Minister Anthony Albanese last year legislated to restrict early access to superannuation funds, arguing that building Australia’s $3.5 trillion retirement savings sector was the way to preserve a dignified retirement.
Last year, Prime Minister Anthony Albanese’s Labor government legislated to restrict early access to superannuation funds, arguing that building Australia’s $3.5 trillion retirement savings sector was the way to preserve a dignified retirement.
In November, Treasurer Jim Chalmers said early access to retirement funds was bad for long-term retirement savings.
“Over the past decade, the previous government exploited the superannuation system for its own purposes, with a devastating impact on the savings of millions of Australians,” he said.
“Legislating a surplus target will help prevent this from happening again.”
But Senator Bragg argued that Labor’s connection to union-dominated industrial pension funds was preventing the government from exploring early access to pension funds.
“Workers don’t care about workers, they care about the donations they receive from unions and pension funds,” he said.
Last year’s Treasury intergenerational report predicted that spending on pensions and aged care would rise by 40 per cent by 2063.
“The idea that retirement funds make a huge difference to pensions is false,” Senator Bragg said.
Senator Bragg argued that helping struggling housing borrowers now would also help reduce the Commonwealth’s rental assistance spending and address intergenerational inequality.
“For younger people who want individual autonomy, this is a practical policy,” he said.
“It is also a policy that helps protect the budget in the long term.”
