Are you willing to sacrifice your retirement savings for a first home?
An analysis of the First Home Super Saver Scheme (FHSS) by Industry Super Australia believes this will be the new reality for Aussies desperate to break into the property market.
The analysis found that the FHSS, announced in the 2017 federal budget, will see that in times of low or negative returns, “superannuation funds will be forced to dip into members’ super guarantee (SG) balances to cover the difference between guaranteed and actual returns”.
Industry Super Australia found that if the scheme had been operational over the last decade, more than half of savers would have had their compulsory super assets deteriorated.
What is the First Home Super Saver Scheme?
According to Federal Treasurer, Scott Morrison:
Savers will be able to contribute $30,000 (up to $15,000 a year within existing caps), and be able to withdraw the contributions along with deemed earnings in order to help fund a deposit on their first home.
Stephen Anthony, Industry Super Australia chief economist, confirmed that the scheme “would offer limited benefit to first home savers and threaten retirement savings”.
“Super funds will be forced to dip into compulsory savings to cover shortfalls in ‘guaranteed’ returns, leaving people with much less at retirement,” he said.
“People must also understand that after paying super contributions and earnings tax, the $30,000 put into the scheme could be worth as little as $25,000 on withdrawal“.
Further, Mr Anthony believes that the FHSS will likely drive up housing demand, leaving first home buyers with increased household debt or locked out of the market.
This is alarming considering that housing affordability is a major issue impacting many Australians.