Mr. Keating recently made headlines suggesting an insurance scheme funded via a ‘longevity levy’ of 2-3 per cent of wages, to provide income for people aged 80-100 who have outlived their savings.

Mr. Keating says saving 9.5% of wages from age 25 to 65 cannot realistically be expected to provide an adequate income until age 90.

Mr Szabo agrees this will become ever more important as longevity continues to improve, but says there is already an answer to funding this improved longevity – the family home. “Longevity insurance already exists for many senior Australians in the form of the family home.”

Mr Szabo said while there are affordability challenges in home ownership for younger generations today, current and ‘soon to be’ retirees enjoy high rates of home ownership. “It would not be equitable to require younger generations to pay a levy to fund incomes for generations enjoying high rates of home ownership, when there is an obvious alternative – expecting home-owning retirees to use some of their housing wealth to fund retirement.”

For many senior Australians who may have exhausted superannuation and other savings, the home is their main or only asset. “Perhaps it would make sense for retirees to first draw down on their superannuation but as this runs out, rather than turning to an insurance scheme funded by an impost on working Australians, senior Australians can turn to their home equity to fund the next stage of their retirement.

“Both assets were built up gradually, and it should also be possible to draw each of them down gradually.  Home equity could also be drawn down to augment superannuation and ensure it does not run out.”

Mr Szabo said home equity release has not been viewed in Australia as a mainstream way of funding retirement, but this will have to change with improvements in longevity. “There needs to be more discussion around the different ways seniors might access this wealth.

“Surely utilising home equity will be preferable to another impost such as a longevity levy on working Australians.”

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Commenting further, Peter Szabo said, “It’s been estimated that over 300,000 Age Pensioners will have entitlements cut with perhaps as many as 100,000 losing all entitlements from January 1 next year”.

“It is important that seniors affected by the changes to the Age Pension Assets Test should consider their financial position with care and not make quick decisions.

“Potential solutions to the reduction in the Age Pension need to be properly assessed including the role that home equity can have in replacing lost entitlements.”

Home owning seniors especially in Melbourne and Sydney have benefited from the significant increase in residential property values. This untapped source of equity can be used to augment existing sources of income to provide a dignified and financially secure lifestyle in retirement.

Peter Szabo continued, “With so many seniors about to lose or have pensions reduced as a result of the new Assets Test, a number will succumb to temptation, to sell their home and downsize”.

“Homesafe has consistently advocated that decisions to downsize need to consider the emotional cost of moving to a smaller home in an unfamiliar neighbourhood no longer surrounded by familiar faces and social networks”.

It also very quickly becomes apparent that smaller ‘downsized’ homes or apartments may be unable to cope with visits from grandchildren, family and friends – or accommodate the storing of a lifetime of memories in collectables.

“It is for all these reasons that seniors need to consider with great care any decisions they make and ensure that they do not forget the role that home equity can have in securing their financial future”.

“The Homesafe solution has been developed to allow seniors to access the wealth tied up in the home by providing seniors the ability to sell a share of the future sale proceeds for an immediate cash sum”.

“These funds can be used to replace lost pension entitlements, avoid the need to downsize and continue to live in the family home with dignity and financial security”, concluded Peter Szabo.

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Time for a seniors’ financial health check: Homesafe Solutions.

When it comes to living a dignified, stress free and financially secure life in retirement – far too many seniors continue to suffer unnecessary financial, emotional and often health related hardship said Homesafe Solutions Managing Director, Peter Szabo.

Yet all that would be required to tackle the solution to so much of this distress and provide peace of mind would be a reassuring conversation with a trusted financial planner, accountant, lawyer or broker willing to address the ‘elephant in the room’ i.e. the untapped equity in the family home affirmed Peter Szabo.

Notwithstanding the professional approach of financial advisers when engaging with seniors, it is important to address their emotional priorities first such as independence, dignity and leaving a legacy to the next generation.

“Accessing the equity in the family home and the life changing potential it would provide continues to be intractably resisted with the process, safeguards and benefits misunderstood and unappreciated by seniors, adviser intermediaries and government”, said Peter Szabo.

“At the core of any solution and advice offering is the importance of providing seniors with peace of mind is that their fundamental goals can be achieved along with the right to live in the family home until death.”

These were the very principles on which Homesafe was developed over a decade ago.

Peter Szabo continued, “As the result of deep emotional attachments to the family home and desire to leave a legacy for the kids, seniors and advisers deliberately omit the family home from the advice process.

“They (seniors) then go on to live lives of unnecessary hardship as they struggle to keep their heads above water financially and physically – all whilst residing in very valuable residential homes with untapped equity value unrealised or utilised”.

With rising health costs, rapidly depleting nest eggs and income sources failing to keep pace with inflation, it is now commonplace to see seniors defer medical and dental procedures that would alleviate pain and improve quality of life.

In addition, undertaking maintenance, major repairs to the home or alterations that would improve mobility and reduce risk of falls and injury are also deferred to the detriment of seniors.

Even though downsizing may be a good option for some seniors, such a decision needs to be carefully made having regard to all their needs. A decision in haste to alleviate financial stress may result in a very expensive and inappropriate undertaking and mistake with the unanticipated transaction expenses, social, family and community costs far outweighing the benefits.

In order to assist seniors, financial professionals must first take into account and understand how emotions impact this sector and their mindset to be independent, desire to stay in the family home and not be a burden on children and family members.

“Homesafe’s equity release offering was developed to allow retirees to live in the comfort of their home by providing senior homeowners the ability to sell a share of the future sale proceeds of their property for an immediate cash sum”, said Peter Szabo.

“These funds can then be used in a financial plan to retire debt, invest, augment superannuation, fund revenue streams, etc. – whatever is most appropriate to underpin a dignified and financially secure retirement”.

Peter Szabo concluded, “More and more senior Australians are finding themselves poorly prepared financially for retirement and need the advice of qualified professionals to help them make the most appropriate choices for their unique situations. Each senior requires an individual solution and the issues are far too complex for answers to be derived online from a website filled with general information in the hope of formulating and executing an appropriate plan.

“Financial professionals are best placed to help seniors navigate these important and potentially confusing and stressful decisions by accessing the untapped equity in the family home to support their financial needs to enable them to continue living with dignity in the family home”.

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Commenting further, Peter Szabo affirmed that SEQUAL’s highest priority has been the welfare of senior homeowners and SEQUAL’s mission has been the development of industry professional standards and a code of conduct under which members undertake their activities and adhere to the very highest standards of Consumer Protection Principles.

Regrettably, far too many equity release and reverse mortgage product providers are failing the industry by not joining SEQUAL and affirming through their membership a commitment to SEQUAL’s code of conduct for senior homeowners that access these products.

Seniors in rapidly escalating numbers are finding themselves denied the Aussie dream of a financially comfortable stress free retirement with funds a plenty for pursuits such as travel, a new car, renovations and still having the capacity left over to leave a legacy for the kids.

Insufficient savings and superannuation and living longer in an economy with rapidly escalating costs of living and health charges is erasing the nest eggs of many retirees long before they need aged care services or die.

“When a senior Australian reaches this point and faces the often deeply emotional decision to utilise the family home to access equity to enable them to live beyond their savings and superannuation, they are owed the very highest duty of care by financial service product providers and the financial service sector in general” said Peter Szabo.

Hence the very real need for these organisations and stakeholders (including government) to affirm their commitment through active industry association membership.

Peter Szabo continued, “Membership of SEQUAL also requires members to utilise and share their industry insight, information and intelligence to develop products and services that go far beyond the only two offerings currently available to the senior consumer – reverse mortgages and equity release by selling an agreed share of the future sale proceeds of the family home”.

SEQUAL’s other function is as the focused and unified voice that can present to government common issues requiring attention and support. It also works with government to develop viable and applicable solutions for issues that impact seniors and retirees, or to work strategically in partnership to advance the industry and sector.

Peter Szabo concluded, “SEQUAL and the financial institutions that comprise the equity release sector have reached a crossroad where the status quo or do nothing approach is unsustainable and will result in heightened consumer anxiety and potential vulnerability.

The industry must unite, come together and collectively raise awareness of the very real challenges and impact of the longevity funding gap that seniors are confronting.

It must develop modern, safe and secure financial solutions for seniors including appropriate regulatory safeguards thereby facilitating new sources of capital.

Finally, SEQUAL is strengthening government partnerships and relationships that in turn will develop a framework for the future that will both guide the sector and government policy and support”.

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Increasing complexity of superannuation driving consumers to seek alternatives.

The constant tinkering and growing complexity of superannuation can only serve to fuel a lack of confidence in the system and drive consumers to seek alternatives to fund or financially support their retirement says Homesafe Solutions MD Mr Peter Szabo.

Running counter to federal government objectives for Australians to fund their retirement through the current regime of industry, retail, corporate and SMSF structures – many will turn to the family home as an option seeing it as a better, simpler and relatively more secure alternative to the vagaries of the stock market, low interest rates and ongoing fiddling with legislation added Peter Szabo.

“While the present and projected growth in the pool of superannuation is impressive it masks a harsh reality confronting many pre retirees and that is they will be leaving the workforce underfunded. In fact the benefits of the superannuation guarantee that started in 1992 will see those retiring in the coming 20 years unable to afford the retired lifestyle they envisage today”.

“The bottom line for those still working currently is they will have to defer retirement and stay in the workforce for longer; and if they can afford it increase contributions to bolster their superannuation savings”.

Even some of the more optimistic estimates of the ‘comfortable average’ (e.g. $650,000 for a couple by Association of Superannuation Funds) needed to fund a reasonable retirement for seniors belies the reality that many have superannuation balances nowhere near the elusive numeric average affirmed Peter Szabo.

Hence the importance and often overlooked value stored in the family home – equity that can be accessed to supplement the underfunded superannuants and low income senior retirees.

Often retired senior homeowners are advised in haste to sell, downsize and find a smaller home not taking into account the financial, emotional and community costs of doing so – especially when there are alternatives that can unlock the value of the property and monetize some of the value thus allowing them to remain in the residence.

“Since Homesafe’s equity release product came onto the market just over a decade ago, it has been welcomed by many senior Australians as a solution far better and less stressful to downsizing or reverse mortgages”, said Peter Szabo.

“By releasing some of the stored value in the family home, Homesafe’s equity release solution provides seniors with a lump-sum they can use to fund the savings, superannuation, longevity financial gap”.

Unlike their predecessors, today’s younger workers will do better and benefit from the superannuation guarantee over their working lives. However they too will face unique challenges that will invariably impact on their ability to contribute consistently to superannuation.

Last week it was reported that Australian home ownership rates are declining and young people preferring to rent instead of buying a property in the current hotly contested residential property market.

Peter Szabo concluded, “Irrespective of whether they be current or past working generations for superannuation to provide sufficient funds to support a long and comfortable retirement requires consistent and regular contributions”.

“Continuing socio and economic uncertainty is the new norm for today’s working Australians that these factors will impact on their ability to contribute sufficiently to superannuation. Add in constant government tinkering with the superannuation system and owning a family home can prove to be a much needed asset lifesaver for ongoing financial wellbeing when it is time to face an underfunded retirement!”

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Telling recent surveys have revealed that many older Australians expect to be worse off than previous generations and retirement security concerns have become a major issue.

Commenting further, Peter Szabo said, “In response, many workers have resolved themselves to deferring retirement and working to age 70 and beyond in the hope that small superannuation balances and savings nest eggs can be bolstered.

“Unfortunately, returns from superannuation are low and with falling investment rates combined with the impact of fund manager fees are not painting a positive outlook for most of these people”.

Australians who have or are about to retire with insufficient superannuation balances will fall into one of two camps – 1) those with balances still owing on the home mortgage; and 2) those with no mortgage debt over the family home.

However, each group is united in that they are living in a house that isn’t counted for in the pension, and in which untapped equity can be accessed without the need to sell, downsize or enter into a reverse mortgage.

Added to the list of financial woes, many experts are predicting life expectancy for today’s 65 year olds to be well into their late nineties for males and females.

This should be great news, except for a vast number whose financial resources and assets will evaporate long before reaching these numbers.

“The extended impact of the low investment return environment has brought to the fore the importance for those retiring with an outstanding mortgage of the value tied up in their family home”, said Peter Szabo.

“Many will respond with a knee jerk solution such as selling the family home and downsizing or using savings and investments to repay the mortgage when equity release using the proceeds to repay the debt would have been a much better option”.

A further consideration for those whose superannuation contributions have stayed within the concessional cap, the proceeds can be paid into super as a non-concessional contribution within the lifetime cap of $500,000 and produce tax-free retirement income.

Pointing to the recent Federal Budget, Peter Szabo said the announcement allowing people aged 65 to 74 to increase their retirement contributions was a very welcome initiative as it will allow retirees to lift their superannuation balances.

“Financial intermediaries and advisers can expect demand for their services to grow enormously and they need to ensure they provide a comprehensive list of options for retirees, including equity release which continues to be overlooked by many practitioners in favour of reverse mortgages or selling/downsizing”.

“Homesafe’s equity release is a far better and less stressful alternative to address many elderly Australians financial challenges. By releasing some of the stored value in the family home and utilised to provide greater long term benefit, seniors will be able to live stress free in a home that suits their social and community support needs”, concluded Peter Szabo.

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Removal of current restrictions on making superannuation contributions for retirement.

Homesafe Solutions MD and Founder Mr Peter Szabo welcomes the announcement in this month’s Federal Budget of the removal of the current restrictions on people aged 65 to 74 from making superannuation contributions for their retirement from July 1 2017.

Commenting further on the announcement, Peter Szabo said people under the age of 75 will no longer have to satisfy a work test and will be able to receive contributions from their spouse.

“Currently, there are minimum work requirements for Australians aged 65 to 74 who want to make voluntary superannuation contributions. Restrictions also apply to the bring-forward of non-concessional contributions. In addition, spouses aged over 70 cannot receive contributions.

“The federal government will remove these restrictions and instead apply the same contribution acceptance rules for all individuals aged up to 75 from 1 July 2017”.

Some commentators are suggesting that the source of the funds for the voluntary contributions could be from selling the family home by downsizing. However downsizing has significant financial and emotional costs.

The financial costs of downsizing are many however the emotional costs can be far greater. For older Australians the emotional cost of moving to a smaller home in a completely new neighbourhood needs to be carefully assessed and may outweigh any financial benefit.

“The Budget announcement allowing people aged 65 to 74 to increase their retirement contributions should be seen as a welcome initiative as it will allow retirees to lift their superannuation balances and defer / delay the need to downsize.

“For those that still have a shortfall, they can utilise a combination of increased superannuation contributions and an equity release arrangement with Homesafe for the balance thus avoiding the need to downsize and in doing so, avoid stress and retain the family home”, concluded Peter Szabo.

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However, many of the issues faced by Australian retirees and the social, personal and financial ramifications of some suggested solutions need to be considered very carefully.

One high profile issue that has emerged is the realisation that on leaving the workforce, many Australian retirees will have most of their wealth tied up in the family home. The balance of wealth will be comprised of insufficient savings and superannuation that will fall far short of the funds required to maintain a comfortable and dignified life in retirement said Peter Szabo.

“Another reality is that many will enter retirement with a mortgage over the family home that will be required to be serviced without the benefit of a salary or wage – or in the worst case scenarios asked to be repaid in full by the lender”.

“Seeing the value of their homes steadily rising over recent years, many will be tempted to succumb to the urge to sell the home and downsize to more ‘modest’ accommodation”.

“Unfortunately many have realised that the decision to sell the family home in order to access the equity, retire debt and fund the retirement savings gap was made in haste and will not deliver the desired financial and social outcomes”.

Those that downsize are usually overly optimistic, want the new property to be within close proximity to the CBD with two and three bedrooms in the new home or apartment to accommodate family, friends and grandchildren when they visit.

As well as being scarce, downsizers soon realise this can be a very expensive undertaking when transaction costs such as legal fees, stamp duty, moving charges, storage, etc. are factored in.

Peter Szabo continued, “There are far better and more appropriate alternatives to downsizing for seniors that allows access to the equity in the family home to fund a comfortable and dignified retirement.

“Homesafe’s equity release offering is one such option that allows retirees to live in the comfort of their home in a familiar and secure environment surrounded by friends, family and community in which they have lived for many years”.

Homesafe Wealth Release commenced operations in 2005 and is still the only debt free option available in the equity release marketplace by providing senior homeowners an option that allows them to live in their home by selling a share of the future sale proceeds of their property (that is fully protected) for an immediate cash sum.

There are no repayments and the senior homeowner has the certainty that they will always retain their share of the sale proceeds.

Peter Szabo concluded, “When it comes to downsizing and relocating to a new home, the process can be emotionally exhausting for retirees seeking a solution to address their retirement financial gap.

“Furthermore as retirees age, illness or death of a spouse amplifies stress, especially if residing in a strange and unfamiliar area with no long standing links and reassuring attachments to neighbours, friends and family.

“All very important factors that must be considered carefully before deciding to downsize, especially when Homesafe’s equity release offering can provide both a financial solution and peace of mind”.

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In 2005 Peter Szabo in partnership with Bendigo Bank sought to provide an alternative for senior homeowners to either selling / downsizing or taking out a reverse mortgage in order to have sufficient funds to sustain a dignified and comfortable life in retirement. “Homesafe was established as a viable and safe alternative for senior Australians to access the wealth tied up in their homes with both security and certainty – principles we have stringently adhered to since the first day of opening our doors over ten years ago”.

After a decade, Homesafe Wealth Release is still the only debt free option available in the equity release marketplace by providing access to the wealth tied up in the family home through its pooled vehicle for investment in residential property.

The Homesafe Wealth Release option has stood the test of time and ensured senior homeowners can maintain a comfortable life in retirement by selling a share of the future sale proceeds of their home for an immediate cash sum whilst still living in their home that is fully protected. The senior homeowner has the certainty that they will always retain their share of the sale proceeds.

The Actuaries Institute research in the recent green paper Unlocking Housing Wealth identified the family home is not only a place to live, but also a store of considerable untapped wealth.

In addition, the Institute’s report hopes to assist policymakers to facilitate retirees’ ability to access this equity as the ability of superannuation to provide a sustainable and comfortable life in retirement will not be realised.

Peter Szabo continued, “The family home is quite literally the elephant in the room and government can no longer ignore the issue with Australia having the highest proportion of home ownership amongst seniors in the developed world.

“Assisting senior Australians to address the very real challenges of funding their lives in retirement needs to be acknowledged as a priority and decision makers must support options to allow retirees access to the equity in their homes”.

At all levels, the sensitivity of issues relating to the family home as a unique asset that goes far beyond being a place to live is acknowledged and government needs to facilitate and assist retirees to utilise this source of wealth to fund their lives in retirement.”

The Actuaries Institute green paper described the dilemma facing older Australians as being asset rich, but income poor. But a comfortable life in retirement can be achieved if retirees want to access their housing equity – and it should be easy and safe to do so.

Seniors have the right to live in a home that meets their needs in an environment in which they are comfortable and gives them (and family members) a sense of security and peace of mind. Being forced to sell or move in order to release some of the stored wealth is not acceptable whilst there are better alternatives available said Peter Szabo.

Now while time is on their side, the government needs to address issues with a proactive principles based approach as the current product based regulatory framework is not meeting the needs of retirees.

“Ultimately the economy and retirees will benefit immensely if more institutional investors were prepared to invest in residential property as the greatest challenge is not demand but supply of sufficient funding and support for this rapidly expanding area”, concluded Peter Szabo.

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