Promotion needed for first home saver accounts

Two years after they were launched, first home saver accounts hold less than two per cent of the four billion dollars the Australian government once projected they would attract after four years.

Anecdotal evidence indicates that the accounts are popular with older people looking to boost their super or donate money to grandkids, but not popular at all with young people themselves.

As at December 2009, there were 16,200 first home saver accounts open with a select group of deposit takers, with a combined balance of $60.7 million and an average balance of $3747, according to the financial industry regulator, APRA.

Most of the nineteen institutions that offer first home saver accounts are credit unions. ANZ and Commonwealth Bank are the only big banks to offer first home saver accounts.

Other institutions to offer the accounts include ME Bank, AMP Bank and IMB Ltd.
 
ME Bank is the price leader in the FHSA market.
 
"The four-year constraint is a big issue for many customers," said ME Bank's corporate affairs manager Tony Beck. "We understand the reason for that is because you are getting access to a government co-contribution and so there needs to be some level of policy constraint around that.
 
"But it is relatively early days and these kind of reforms take time to embed in the public consciousness."
 
Beck says the government could do more to promote the accounts.
 
"FHSAs were very soft launched," said Beck. "They were not actively promoted and supported by the government. We think more could be done.
 
"The uptake could have been better if the government could have invested more time and energy building awareness about them."
 
The credit unions and mutual umbrella group have also been critical about the accounts.
 
"FHSAs have proved a disappointment to date," said an Abacus submission to the senate estimates committee into small business funding, previously reported in BankingDay.
 
"The four-year 'lock-up' requirement is too long and is the single most important disincentive for savers. Abacus recommends that the Government should remove or reduce the period of time during which savings in FHSAs can't be withdrawn."
 
Beck said ME Bank does not support the Abacus idea to abolish the four-year threshold.
 
"We come from a superannuation background I suppose," said Beck. "We understand the reason for that time frame is because you are getting access to a government co-contribution and so there needs to be some level of policy constraint around that.

"However, we do think there are a number of initiatives that could be undertaken by the government to promote first home saver accounts."
 
ME bank will be promoting FHSA in coming months, Beck said.
 
"Right now we are getting ready to promote the accounts to our customers and stakeholders because now is the time (before the end of the financial year in June) to take out a first home saver account."