The Gov’s Thinking of Letting Young People Use Their Super For a Home Deposit; Read This First

Here's what you need to know.

It was recently reported that the Australian Government is floating the idea of allowing young people to dip into their supers for home deposits.

So, now seems like the right time to get an understanding of what superannuation actually is.

What even is Super?

Superannuation is an accumulative amount of money, saved each week you work, put away for your retirement by your employer. It can be accessed once you retire, and it’s intended that this will be the money you can live off, excluding your pension.

From your earliest working days, your employer legally has to pay a percentage of your earnings to either your selected super fund or the one your workplace has selected for you. (Here’s a pro tip from the Australian Securities & Investments Commission: “The more money you save the sooner you can stop working.”)

When can I retire and access that sweet, sweet super?

Well, individuals born from July 1, 1964 (aka you, probably) will be able to access their super at the age of 60. Your pension, however, won’t kick in until about 67. In fact, by the time you reach retirement age, there’s a good chance both of those numbers will have increased.

But hang on, I might be able to access it when I’m younger for a home investment?

Not just yet. Back In 1993, the government proposed that first-home buyers should be able to access their retirement savings to afford a deposit for a house. This proposal then re-surfaced in 2015 and is a current topic among the federal government.

Some first-home buyers may see their super as enough money for a house deposit, just sitting there waiting for them to dive into.

But the real question is, if you began diverting your superannuation into a savings fund now (as is apparently being considered in a plan by Treasurer Scott Morrison), how much would you be left with to comfortably retire and live the way you want? The answer to this question may give young people pause.

So, how much would I need to live comfortably?

Every individual is different, but according to the ‘Super Guide’ written by Trish Power in January 2017, a single individual would need to have saved a lump sum of at least $490,000 to live ‘comfortably’ today, even if they were also receiving the age pension. Without the government-funded pension, the amount of money required would be about $805,000. (This suggested amount is assuming a retirement of 22 years.)

So, what does this all mean?

Right now, it seems unlikely that the government will crack open our supers simply for potential home investments, but who knows what could happen in the years to come. If that day comes, be thoughtful with how you proceed. The future of our elderly days sipping tea and complaining about youths await us.

Jess Pabian is one of Student Edge’s student contributors. See more student contributions here.

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