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Keating's 'longevity levy' an unnecessary impost on the young when seniors already have wealth in family home

A ‘longevity levy’ as proposed by former prime minister Paul Keating would be an unnecessary impost on the young given many senior Australians are already sitting on significant housing wealth, according to Peter Szabo, founder and managing director of Homesafe Solutions.

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.”