MP quizzes banks on super for housing

The House of Representatives standing committee on economics has released the responses of a number of banks to a question from Mr Wilson, around raiding superannuation savings to purchase a home.

Mr Wilson, who is chair of the committee, has previously rallied for early access of superannuation savings for first home buyers, to place towards house deposits – despite Superannuation Minister Jane Hume denying the government would consider implementing such a measure.

He has also explored the idea during parliamentary hearings, where the standing committee has summoned chief executives from the banking industry.

During a hearing, Westpac had indicated it could explore whether it was able to develop a product that uses super as a form of security, in the event that housing for super was permitted by law.

Mr Wilson had asked the CEOs of the big four banks and a number of non-majors, what legislative change would be required to allow them to devise a product that uses super as a form of security, for consumers buying their first home.

According to CBA, the exact changes would depend on how the scheme was intended to operate.

ANZ listed laws in superannuation, bankruptcy, security, taxation prudential regulation as potential hurdles.

A lender would need to be able to obtain effective security over the borrower’s interest in their super fund, the bank noted.

“An interest in a superannuation fund generally entitles the beneficiary to cash their benefits when a condition of release is met (e.g. turning 65 or attaining the preservation age and retiring),” ANZ stated.

“Assuming that a lender was able to perfect legal security over the interest, it would also need to be able to access funds upon a default occurring, rather than waiting for a condition of release to be met (which may be some time in the future and may be subject to change). This may require a new condition of release connected with the enforcement of the lender’s security.”

NAB pointed to the Superannuation Industry (Supervision) Act 1993, which includes safeguards to protect super funds against action from third parties.

“There is a range of factors a financial institution would need to consider in developing any product utilising superannuation as a form of security against a loan, if this was government policy,” the bank stated.

“These range from legislative and regulatory to commercial risk settings and prudent lending considerations. These would need to include addressing the right of recourse to the payment stream or funds in the superannuation fund if the customer defaulted on the loan.”

Westpac similarly noted restrictions on the ability of super members to obtain early access to their retirement savings as well as limits on the purpose for which super trustee exercises its powers (primarily to provide benefits for members’ retirement) and on the ability to grant security over funds held in trust.

“These limitations mean superannuation funds are not suitable as a form of security for a loan,” Westpac said.

The Bankruptcy Act 1966 (Cth) also excludes the interest of a bankrupt person in a regulated super fund from the property divisible among creditors, while the Personal Property Securities Act 2009 (Cth) excludes from the personal property security register interests that people have as members of a super fund.

The tax law would need to be considered, if any, the granting or enforcement of security over the superannuation interest would have for the borrower, ANZ added.

Meanwhile, Bendigo and Adelaide Bank commented the current responsible lending rules would need to be reviewed to enable a super for housing product.

Mr Wilson’s early super access for housing notion has been supported by Liberal senator Andrew Bragg.

In February, Mr Wilson also proposed that super funds should be banned from investing in property, if Australians can’t use their own retirement savings to buy houses.

Interestingly, ABS data showed that people who had withdrawn their retirement savings via the government’s COVID-19 emergency early super access scheme last year primarily used their funds for mortgage or rent payments.

An ABS survey found 31 per cent of early super recipients used their money to fund mortgages or rent.

Meanwhile, former prime minister Paul Keating has suggested that super funds could fund public and affordable housing.

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