Retirees have resumed their plans to downsize due to “feeling more confident” as COVID eases, according to BT.
According to BT Financial Group, its technical services team fielded 2,000 queries from financial advisers between September to December 2020, largely in relation to client queries around downsizing.
The queries came following a brief hiatus in downsizing activity in early COVID, BT’s technical consultant, Tim Howard, suggested.
“During the worst of the pandemic, it seems many retirees stayed put and delayed any decision to move,” Mr Howard said.
However, Mr Howard added that, “With the pandemic situation mostly under control in Australia, along with positive news about the development of viable vaccines, retirees have been feeling more confident and are putting their plans in motion.”
Given that COVID-19 had delayed the passing of legislation relating to changes to bring forward contributions, the top five topics on which advisers sought technical advice from BT’s Financial Literacy and Advocacy team in the past quarter included:
- Downsizer contribution to superannuation: BT outlined that those aged 65 and over may be eligible to make up to $300,000 in downsizer contributions to their super fund within 90 days of selling their main residence;
- Impact of selling home on age pension eligibility: BT suggested that if a client has sold their principal home and will buy, build or renovate a new principal home, then the proceeds can be exempt under the assets test for 12 months;
- Superannuation guarantee amnesty: advisers can apply to the ATO to disregard or re-allocate payment/s to the financial year the contribution should have been made;
- Bring-forward contribution changes – BT outlined that queries were high on this, given the legislation on increasing the age to 67 years old for an individual to make a bring-forward non-concessional contribution to super has still not passed Parliament;
- Treatment of foreign assets, pensions and income streams: BT suggested that advisers would still need to check Centrelink’s foreign assets and income streams eligibility criteria.
While the first few months of COVID-19 delayed many financial decisions, travel restrictions and a renewed sense of the value of time has caused some Australians to review their foreign assets and income streams and increasingly look to improving their retirement.
Speaking to The Adviser in November 2020 for an In Focus video, partnered by La Trobe Financial, demographer and author Bernard Salt suggested that downsizing could become an increasingly appealing option for the ageing population, as they look to sell their family homes and purchase an apartment or townhouse.
La Trobe Financial’s chief lending officer, Cory Bannister, agreed, adding: “COVID has certainly reinforced the point that life can be cut short at any given moment, and keeping the large family home, which can often represent the majority of the household balance sheet, may no longer be desirable for elderly Australians who recognise that perhaps a more modest abode in the same community that they’re familiar with is more appropriate,” Mr Bannister said.
“Particularly if that can unlock equity that they can use to enjoy their retirement or perhaps to invest in alternative areas, then that might be more appropriate for the time being.”