Aged Australians focus in largest retirement home-equity ‘boost’

With 2023 forecast to be the “biggest year ever” in Australian home equity retirement funding at over $750 million, independent provider Household Capital closed an M&A transaction to acquire Pension Boost, the company announced on Friday (2 December).

Through its acquisition of Pension Boost — a home equity access start-up launched in 2019 — Household Capital will now provide both federal government Home Equity Access Scheme (HEAS) and household loan products to older Australians, it has confirmed.

The move makes it the largest originator of home equity retirement funding in Australia, it has explained.

According to Pension Boost, there are 1.8 million seniors on the age pension who own property, many of whom could use additional cash flow to “better enjoy their retirement”.

The concept behind Pension Boost is to help retired Australians access the federal government’s Home Equity Access Scheme (HEAS) and it originates around 30 per cent of HEAS applicants, it has outlined.

It streamlines the process of accessing the HEAS with Centrelink for its retiree customers and via its “straight-forward proposition” it educates consumers on the HEAS, simplifies the application process, and undertakes all follow-up with the relevant government agencies.

Household Capital chief executive, Dr Joshua Funder, said the acquisition will enable Household Capital to provide a trusted ‘one-stop-shop’ service for Australian retirees to access their home equity to meet their retirement funding needs.

“The acquisition expands Household Capital’s proposition, widens its market reach and is consistent with our strategy to be the most trusted provider in the Australian home equity release market,” said Dr Funder.

“The combined business will position us to be the leading provider of home equity retirement funding.

“Together we play a critical role in meeting the needs of an ageing population, particularly as many Australian retirees have inadequate super saved to meet their needs.”

The third pillar of retirement

According to Household Capital, the government’s Home Equity Access Scheme is exhibiting similar growth rates to Australia’s home equity access market, currently circa 40 per cent per annum and is expected to become “a more material component” of the home equity market over time.

As Dr Funder highlighted: “2023 will be the biggest ever year in Australian home equity retirement funding, forecast at over $750 million — this is an inflection point in home equity as the third pillar of retirement housing and funding.”

‘Innovator’ Paul Rogan started Pension Boost following co-founding Retirement Essentials after a long career at Challenger. Mr Rogan will join Household Capital’s advisory board.

Commenting on the transaction, Mr Rogan said: “It’s clear we both share the same ambition to cement home equity access as the third pillar of retirement funding.

“Bringing the two businesses together establishes the leading platform for retirees looking to improve their retirement funding.

“The combined platform also enables superfunds and financial advisers to support their retiree members or clients.”

Household Capital chair, Nick Sherry, said: “The Pension Boost platform, Paul, and the team, extends our capability and will complement our mission to deliver scaled access to home equity.

“We believe our proposition, together with superannuation and the Age Pension, provides the full package for retirees.”

The full package for retirees

As the companies outlined, accessing home equity provides older Australians with flexibility and choice. It provides them with the “opportunity to get themselves ‘retirement ready’ by refinancing an existing mortgage or other debt or renovating their home to live comfortably and safely throughout retirement”.

Importantly, during times of market volatility, retirees can draw on home equity rather than income-producing assets, preserving the longevity of those assets, Household Capital stated.

Household Capital advisory board chair, Deborah Ralston, commented: “Home equity is a large part of a retiree’s overall savings; the integrated platform that Josh, Paul and the team have created is an innovative way to access the third pillar of retirement funding.”

Dr Funder added: “We are excited to bring the two businesses together to explore ways to help Australia’s retirees improve their retirement funding options with the best mix of products, interest rates and service.”

[Related: Government introduces incentive for pensioners to downsize]