Radical change to superannuation that could solve the housing crisis: Liberal Senator Andrew Bragg says Aussies should be allowed to withdraw all their super to pay off mortgage

Australians should be able to withdraw their entire superannuation balance to pay off their mortgages, a Liberal Party spokesman has said.

The Coalition campaigned during the last election to allow young Australians buying their first home to withdraw $50,000 from their retirement savings accounts to fund a mortgage.

Since the Labor Party came to power in May 2022, the average mortgage borrower has paid $19,000 more per year. However, people who are behind on their payments or even in default cannot immediately tap into their pension fund due to current severe financial hardship rules.

With the cost of living crisis taking a heavy toll on borrowers, Opposition housing spokesman Andrew Bragg wants Australians to be allowed to withdraw all their superannuation money to pay off their mortgages, suggesting the Liberal Party could make it an election issue.

“We are looking at it, 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 is allowed to use $200,000 from his super to offset the loan.

That would make a huge difference to your interest [being paid],’ he said.

‘So you pay off more than the principal and you get closer to buying a house.

‘The most important determining factor for your success during your retirement is not your pension balance, but your home ownership.’

A Senate economics committee is investigating the idea of ​​giving Australians earlier access to their pensions.

The report of the research ‘Improving consumer experiences, choice, and outcomes in Australia’s retirement system’ will be published next month.

An interim report published in May recommended that Australians be allowed to open a mortgage offset account linked to their superannuation pension, allowing borrowers to make monthly repayments from their superannuation savings rather than dipping into their bank savings.

“There are many Australians who have significant superannuation balances that they would like to offset against their mortgages to reduce their interest payments and move closer to home ownership,” Senator Bragg said.

‘There are several ways to achieve this, ranging from full withdrawal to keeping the money in a legally established compensation account.

‘One of the things that worries me is that people are forced to pay high costs to their pension fund and at the same time pay a high interest rate to a bank.’

Current serious emergency rules only give Australians early access to superannuation if they are receiving a Centrelink benefit, have lost their job or are seriously ill.

Senator Bragg, chair of an economics committee, said current early access rules were too strict and meant Australians could only buy a home with help from their parents.

“It’s a very rigid system. I just don’t believe in the idea that we have to force everybody into a straitjacket,” he said.

‘If the Bank of Mom and Dad now determines the outcomes on the housing market, we will find ourselves in very dangerous territory.

‘We are increasingly seeing housing outcomes being dependent on parental wealth, which is very bad, I would say very un-Australian.

“If we leave out the Bank of Ma and Pa, this is probably the single largest source of capital for people.”

The previous Coalition government allowed Australians to withdraw from their superannuation funds in two $10,000 instalments in the first and second half of 2020, as businesses were unable to serve customers in person due to Covid lockdowns.

The Labour Party is against early access to super pensions. According to them, this would deplete the pension savings account and make the elderly more dependent on the AOW, which is available to most people when they turn 67.

Australians born after July 1964 cannot claim their pension until they turn 60.

The Reserve Bank’s 13 rate hikes since May 2022 have seen monthly mortgage payments rise by 68 per cent, with the cash rate now at a 12-year high of 4.35 per cent.

As a result, monthly payments on an average $600,000 mortgage have increased from $2,306 to $3,868. Annual payments are now $18,744 higher than just over two years ago.

But the average Australian has $164,126 in retirement savings, Taxation Office data shows.

Prime Minister Anthony Albanese’s Labor government last year passed legislation to limit early access to super pensions. Albanese argued that building up Australia’s $3.5 trillion superannuation industry was the way to maintain a decent retirement.

Finance Minister Jim Chalmers said in November that early access to superannuation is bad for pension savings in the long term.

“Over the past decade, the previous government plundered the superannuation system for its own purposes, with devastating consequences for the savings of millions of Australians,” he said.

“By legislating for the purpose of super, we can prevent this from happening again.”

However, Senator Bragg argued that Labor’s links with union-dominated industrial pension funds were preventing the government from exploring early access to pensions.

“The unions don’t care about the workers, they care about the donations they receive from the unions and the pension funds,” he said.

Last year’s Treasury Intergenerational Report predicted that spending on old-age pensions and elderly care would rise by 40 percent by 2063.

“The idea that superannuation makes a big difference to retirement is wrong,” said Senator Bragg.

Senator Bragg argued that helping struggling homebuyers now would also help reduce Commonwealth spending on rent subsidies and address generational inequality.

“For young people who want individual control, this is a practical policy,” he said.

“It is also a policy that helps protect the budget in the longer term.”