The specialist lender’s new drawdown facility, unveiled on Monday (26 August), is aimed at providing retired Australians with access to lump sum payments using equity in their home, in addition to regular income.
Household Capital noted that the Pension Loan Scheme, the scope of which was expanded in the 2018 federal budget to make it accessible to a greater number of retirees, doesn’t provide lump sum payments.
The lender said it developed the new drawdown facility in response to financial advisers looking to help their clients obtain lump sum payments, in addition to having regular income streams.
Household Capital CEO Joshua Funder commented: “We find most people looking for a regular drawdown also take a lump sum for a specific purpose, such as renovations, a new car, medical expenses or to provide financial support to children and other family members.
“There are various expenses which can arise in retirement, so we have developed a flexible funding solution which can be tailored for these individual requirements whatever they may be.”
The facility is available to customers of Household Transfer, which was launched in March this year to allow retirees to access additional retirement funds by using a low-interest loan to transfer a portion of the value of their homes into their superannuation fund or investment account.
“An estimated 439,000 Australians intend to retire in the next eight months despite average savings being well below the recommended level. This is fuelling interest for household equity release products like Household Capital’s Household Transfer,” Household Capital said.
“Australia’s median household superannuation balance at retirement is approximately $200,000, yet the median value of home ownership at retirement is $700,000.”
ME Bank earlier this year provided a $100-million wholesale debt facility to Household Capital, in addition to making a strategic equity investment in the lender.
The retirement lender currently operates on a fee-for-service model, meaning that it does not pay any commissions to brokers.
“Household Capital receives an establishment fee to cover the costs of putting the loan in place, and interest is charged on the capital drawn from a person’s home. The final amount is paid when the person leaves the home and the house is sold,” the lender previously explained.