Taking superannuation lump sums still represents a significant factor for people when they enter retirement, but Parliamentary questioning by Liberal back-benchers has revealed it should not be counted as a significant factor in the debate over the use of superannuation in home ownership.
When the chair of the House of Representatives Standing Committee on Economics, Tim Wilson late last year interrogated Hesta chief executive, Debbie Blakey on how many members who had reached retirement had used their superannuation savings to pay down their mortgages he may have been disappointed by the answer.
According to Hesta, fewer than 2.5% of its members took such an option.
Answering Wilson’s question on notice, Hesta said that in the 2018/19 financial year, “there were 274 members who withdrew their full retirement benefit as cash within 90 days of turning 65. This represents 2.41% of members who turned 65 during FY18/19”.
While superannuation executives said the figure provided by Hesta appeared exceptionally low they acknowledged that the incidence of superannuation fund members taking lump sums at retirement had reduced substantially over the past decade or so.
Deloitte superannuation partner, Russell Mason said that, in his experience, the per centage of members taking lump sums stood at around 35%, which was well down on what had been the case in previous years.
He said that it was common for those near to or entering retirement to seek financial advice and that where a lump sum was taken it might often be used to reduce debt, including paying down a mortgage.
“But what has to be remembered is that in many instances people who reach retirement age do not necessarily retire. They work on and retain their superannuation balances,” Mason said.
During questioning of HESTA, Wilson asked Blakey whether she accepted “that it's logical that, if somebody, once they hit the first point where they can withdraw their money, withdraws it not for the purpose of moving it to another fund but to move to cash, they are probably likely to be using it to using it to pay off an asset like a home; is that correct?”