Do you think that pension is your ‘nest egg’ for the future? Anthony Albanese’s government has a cruel message for you: it is pushing for a new rule

Employees treat their pension as an investment or as a ‘nest egg’ for the future, while it is intended to be used for a dignified retirement, the government says.

Prime Minister Anthony Albanese wants a super target to be passed into law next year and a Treasury discussion paper has provided new insight into what that will mean for Australians.

Tightening access to pensions could potentially deter workers from accessing their super to buy their first home – a policy favored by the Liberal Party.

“The Government’s proposed purpose of superannuation makes clear that the purpose of superannuation is to provide Australians with an income for a dignified retirement,” the Treasury document said.

‘However, Australians often view and characterize their superannuation balance as a ‘nest egg’ or an investment, rather than as savings to be used to provide a retirement income.’

As part of Labour’s statutory target for super, Treasurer Jim Chalmers and his assistant minister Stephen Jones have announced a change to super so more Australians can access annuities.

This is where a person receives regular payments from their retirement savings every year.

“The problem is that most retirees do not have access to the right products to help them maximize their livelihood throughout their lives,” ministers said on Monday.

The Finance Ministry’s discussion paper noted that only 3.5 percent of pension products offer annuities, or fixed amounts paid annually to retirees.

The Treasury noted that Australians are living longer and will need to rely on their pensions for longer.

A woman who retires at age 65 has a 45 percent chance of living to age 90, compared to 33 percent for a man.

“As a result of increased life expectancy, more retirees must rely on a retirement income that is sustainable until the late 1980s and 1990s,” the Ministry of Finance said.

“In fact, the likelihood is even greater, as improvements in health and medicine will further increase life expectancy during one’s retirement.”

The Treasury also wants people to consider super as a source of income and receive a higher pension standard.

“Framing retirement in terms of income can help put it in terms that are useful for budgeting and decision-making, in the same way that people are used to managing their finances from their working lives,” the report said.

The housing affordability crisis

Labor has put more energy into improving access to pensions, even as housing becomes increasingly unaffordable for young people.

New credit data shows demand for residential mortgages continued to rise in October, with high immigration boosting demand for homes.

Credit obligations for first home buyers increased by 5.1 percent in October. They were up 6.8 per cent over the year, the Australian Bureau of Statistics revealed.

The average loan size for first-home buyers grew 0.3 percent to a record $507,000. With a 20 percent down payment, that could buy a $633,750 home.

This is less than half the median house price of $1.397 million in Sydney, meaning a first home buyer could only afford a home in Australia’s most expensive capital.

First home buyers made up just under a third of 32.6 per cent of borrowers, with many relying on financial help from their parents to get on the property ladder.

The average Australian loan for an owner-occupier rose 1.9 per cent to $610,332 in October, but in New South Wales new borrowers typically owe $764,455.

Tightening access to pensions could potentially deter workers from accessing their super to buy their first home – a policy favored by the Liberal Party (pictured is a young woman in Sydney’s Bondi)

Treasurer Jim Chalmers and his Assistant Minister Stephen Jones have now announced a change to super so that more Australians can access products such as annuities where a person receives regular payments from their superannuation savings for life

Super condition

Labor introduced draft legislation in October so that the 0.5 per cent of Australians with $3 million or more in super will double their concessional tax rate on contributions to 30 per cent from July 2025, up from 15 per cent.

The government said this would only affect 80,000 people, but the Financial Services Council argued that Labour’s plan would hurt 500,000 people as part of a plan to save $2 billion a year.

Australians have invested $3.5 trillion in super funds, but 27.6 per cent, or $964.5 billion, of that is defaulting MySuper products dominated by union-backed industry super funds, data from the Australian Prudential Regulation Authority.

Since mandatory employer super debuted in 1992, only coalition governments have relaxed the rules to allow early access.

Former Liberal Prime Minister Malcolm Turnbull’s government introduced the First Home Super Saver Scheme in 2017, allowing $15,000 per financial year to be taken from super, but only from voluntary contributions.

A total of $50,000 can be withdrawn to fund a mortgage deposit on a first home.

During the 2020 pandemic, Scott Morrison’s government allowed $20,000 to be withdrawn in two $10,000 installments if the Covid lockdowns had hurt them financially.