The ‘first-home super saver’ scheme unveiled in the federal budget is not expected to drive a boom in home ownership among young workers; however, it could help get the Millennial generation thinking about their superannuation.
Under the new scheme, a super fund member will be allowed to withdraw a maximum of $30,000 in voluntary contributions, plus deemed earnings, to finance the purchase of their first home. The policy will take effect from July 1, 2018.
Given only 2 to 3 per cent of workers in the Millennial generation currently salary sacrifice, the pool of people tipped to access the scheme is small, Association of Superannuation Funds of Australia chief executive Martin Fahy said.
“However, the publicity around this scheme might generate a greater level of engagement and that can only be a good thing,” Fahy said. “There will clearly be those who benefit from the tax relief on it, but we think it will drive greater and greater engagement with superannuation.”
Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck held a similar point of view. She told Investment Magazine that $30,000 was, unfortunately, not a significant amount in the current housing market, particularly in cities, but predicted the scheme could establish good saving habits among Millennials.
“One potential positive outcome from this is that…it’s a real opportunity in terms of higher engagement levels, and if people get into a habit of putting additional money into super, that is something we would welcome,” Scheerlinck said.
Both Scheerlinck and Fahy were concerned, however, that the scheme could result in increased cost for all members. That’s because the administration of the scheme is complex. The money is invested through a super fund, but the associated records will be held by the Australian Taxation Office.
“ASFA recognises the importance of home ownership as a key pillar for achieving comfort and dignity in retirement; however, the design of any new first-home savings arrangement should never impose on the primary role of super, [which is] to save for retirement,” Fahy said.
Cbus Super chief executive David Atkin was also concerned. He said Cbus would review the details of the scheme to evaluate the impact on workers’ future retirement savings, administrative costs and complexity, and any liquidity implications that could affect longer-term investment strategies.
Others in the industry were more positive.
StatePlus said it believes first-home buyers would be wise to embrace the tax savings offered through the new home savers account.
“This scheme allows young people to save through their super for their first home. It’s an easy tax break and one StatePlus predicts will prove wildly popular,” StatePlus chief client officer Jason Andriessen said.
The Financial Services Council commended the government for designing a new scheme to promote savings for first-home buyers, “without diluting the current superannuation nestegg provided by our universal superannuation system”.
Deloitte head of superannuation Russell Mason also supported the proposed First Home Super Saver Scheme.
Mason explained that if the contributions were made by salary sacrifice, they would be taxed at 15 per cent and the money, plus interest, when withdrawn, would be taxed at the individual’s marginal tax rate, minus 30 per cent.
“We are pleased that the government did not allow the superannuation guarantee contributions to be eroded,” he said. “We are also pleased that the scheme, which will be administered by the ATO, will hopefully mean that an additional administrative burden – and therefore additional cost – will not be placed on superannuation funds.”