2021 Household Capital Three Pillars Forum demands holistic retirement funding solutions


Josh Funder

Household Capital Three Pillars Forum Demands Holistic Retirement Funding Solutions September 16, 2021 The 2021 Household Capital Three Pillars Forum was held on September 16 and attended by hundreds of industry leaders and stakeholders.

Since commencing in 2019, the Household Capital Three Pillars Forum, has grown to welcome a larger number of panelists, this year including three expert panels.

Sponsored by Household Capital, the Three Pillars Forum is determinedly independent and seeks to unite all three pillars of retirement funding: superfunds, the Aged Pension and home equity. This year the Three Pillars Forum was hosted by Australian journalist and broadcaster Ali Moore.

Panel One: Australian retirees are the wealthiest in the world; but are they loving life?

Opening with a plenary address from Senator Anne Ruston, this consumer-focused panel was joined by Ben Hillier, Troy Sloan, Jeremy Duffield, Noel Whittacker and Kyra-Bae Snell and looked at the lack of retiree confidence, despite their wealth.

In her remarks, Senator Ruston, Minister for Families and Social Services, highlighted Australian paper millionaires, saying, “We want our senior Australians to enjoy the best quality of life during their retirement and one of the key factors in achieving this is financial independence. The three pillars you are discussing today, the Aged Pension, superannuation and voluntary savings are so important to this and form the basis of Australia’s retirement income system.

“To improve the welfare of our older Australians, these three pillars must work together and be fit for purpose. For many senior Australians the Aged Pension is a key source of retirement income, but with housing prices increasing significantly in recent years, we are seeing many of our senior Australians paper millionaires with limited ability to access the benefits of their appreciating assets.”

Ben Hillier, General Manager Retirement Solutions at AMP, spoke to the lack of information available to retirees saying, “I like to use the analogy that that’s like putting someone into a lifeboat, when they’re expecting to go on a retirement cruise. They’re perhaps thinking that it’s going to be the cruise of a lifetime. We whack them in a lifeboat, load them up with lots of provisions and push them off and say, “There you go, enjoy your retirement.”

“They say, “Well, how long do I need to make these provisions last?”. “Well, you figure it out!”. “How much do I consume?” Well, it’s entirely up to them. We’re putting all the risks onto the retirees. Which is just far too much to expect for people who aren’t finance professionals.”

Jeremy Duffied, Executive Chairman of SuperEd and Retirement Essentials, described his perfect solution, saying, “In a utopia I’d go for simplicity because we must have one of the most complex systems in the world from the superannuation system to the Aged Pension system, to our advice regulation. I’d be looking for every opportunity I could to simplify things but I don’t expect that utopia to develop. I would do things like pursue the retirement income covenant and try and make retirement income forecasts readily, widely available, to help people understand what that means, because it helps them address the great questions of how much can I spend and how long will it last.

“Encouraging retirement income forecasts is something that super funds and the government can do. I would push super funds to help people get into account based pensions at the right age and not to stay an accumulation too long. And I would encourage super funds to keep their members into retirement, even if they have relatively small balances.”

Panel Two: Housing and funding retirement; the economic boost of a trillion dollars of Australian retiree property

Focussed on the economy, this panel opened with an update from Professor Hazel Batemen, before the international panelists Andrew Kail, Professor Thomas Davidoff, Emma Dawson, Tim Lawless, James Hickey and Bob Officer explored the potential economic boost from releasing the $1 trillion dollar Australian retiree property portfolio.

Tim Lawless, Head of Research at CoreLogic Asia Pacific, spoke to the rapidly rising value of the Australian property market, saying, “It was only back in early April that we estimated the overall asset value of housing in Australia had broken the $8 trillion mark. And by the end of August, it had risen to $8.9 trillion. And almost without a doubt, by the end of September, we’ll have an asset class that’s worth about $9 trillion.”

Emma Dawson, Executive Director of Per Capita, said, “For a lot of Australians, in fact, the vast majority of working Australians, the family home is where their wealth is stored. And as we age, the capital gain that people have made on that property over the last 20 to 30 years is of no use to them if it’s not improving their standard of living. And it’s about enjoying those years of your retirement, where you’re still healthy and well enough to enjoy life spending a little bit more money then, so that you are reaping the benefits of having made that capital gain.”

James Hickey, Partner at Deloitte, said, “It’s not just the Aged Pension and superannuation. It’s also now including other forms of wealth, including housing wealth in considerations for people, when they look at their retirement. I think that we should give the incentive to financial planners to actually see it as an obligation upon themselves to understand the role of the family home, and the repository of wealth that that could present. Under the Retirement Income Covenant, it may well require superannuation trustees to have an understanding of the value of the home, of the member and what role that could also play in a retirement income strategy. So, there is a ground swell of momentum happening, and the encouraging thing is that equity release is being considered in a lot of those discussions.”

Panel Three: Longevity, a blessing or a curse?

Uniting the industry to fund an ageing population. The final panel united experts from every element of aged care funding including superannuation, the Aged Pension, home equity including the Pension Loan Scheme, and the latest in technology delivery. Dr Deborah Ralston both gave the introductory address and joined the panel along with Steven Reilly, John Maroney, George Haramis, Dr Joshua Funder.

Dr Deborah Ralston, Co-Author of the Retirement Income Review, said, “One of the things that we really want people to do is to enter retirement feeling confident and happy, about the fact that they are able to live a good quality of life, and that they can use their resources. Too often, people are afraid to spend their savings because they’re concerned that they’ll run out of money or there’ll be huge costs involved. And if we structure our products right, we can give people confidence to know that they’re not going to run out of money and that they’ll be able to afford the comfortable retirement that they saved for.”

Dr Joshua Funder, CEO of Household Capital, spoke to the positives saying, “We’ve got a real opportunity because we’ve got good healthcare and longevity, challenge and a benefit. We’ve got a good pension that’s sustainable, means tested, higher for those who get it than off shore when everybody gets a flat pension. Got good housing, residential property, and we’ve got a good superannuation system, but it’s not there yet for baby boomers. We’ve got great home equity that we can add and it’s already been declared in a world-leading way as the third pillar. So, funnily enough, Australia’s got the chance to meet the challenge of an ageing population with the existing componentry and the wealth that we’ve already saved.”

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