The concept of the Australian dream has long been synonymous with owning a family home. It's a symbol of security, a place to raise a family, and, for many, a significant part of their retirement plan.

However, recent discussions have revealed a contentious issue that could impact retirees with high-value homes.

The Actuaries Institute suggested that the government consider including the value of family homes above $2.1 million in the age pension asset test.

This move would encourage retirees to downsize and release some of the estimated $1.3 trillion in housing equity held by Australian retirees, according to the Institute.

Actuaries Institute suggested including the value of family homes over $2.1 million in the age pension asset test.

This proposal, detailed in a discussion paper, suggested that the value of the family home above the threshold should be included to assess the eligibility for a full or part age pension.

The Actuaries Institute's recommendation is an inflation-adjusted echo of the 2010 Henry tax review, which suggested that homes above $1.2 million owned by retirees should be included in asset testing.

With a 4 per cent annual indexation, today's threshold would be around $2.1 million, potentially varying by region or postcode to reflect the diverse property market across the country.

Currently, the family home is exempt from the asset test for the age pension, a policy that the Actuaries Institute believed should be reconsidered.

The inclusion of high-value homes in the asset test could lead to a reassessment of entitlements for a number of age pension recipients, similar to the estimated 10,000 affected if the policy had been implemented in 2010.

National Seniors Australia and the Combined Pensioners and Superannuants Association (CPSA) have both rejected the idea.

National Seniors Australia Chief Executive Chris Grice advocated for ‘a universal pension with appropriate tax reform’.

On the other hand, CPSA believes the current asset limits for the age pension were ‘sufficient’, stating, ‘the Australian government has plenty of other options to make homeownership more affordable for younger generations.’

Counting the family home in the age pension asset test has long been a taboo subject, and the government has previously dismissed the notion.

However, Andrew Boal, the report's author and Chairman of the Actuaries Institute’s Retirement Strategy Group, argued that Australia should not shy away from this debate, especially considering the recent tax changes for superannuation accounts exceeding $3 million.

‘One of the things we’ve seen recently is the introduction of the additional earnings tax for superannuation accounts of more than $3 million, so difficult changes can be made,’ Boal said.

The 2020 Retirement Income Review highlighted that retirees often avoid tapping into their housing wealth to fund retirement, even with limited income.

This is despite various incentives and home equity release schemes available to them. With data showing that over 60 per cent of retirees have less than $250,000 in superannuation, the report suggested additional measures to support asset-rich, cash-poor retirees.


These measures include abolishing stamp duty for downsizers over 55 and allowing those who access equity in their home through schemes like reverse mortgages to make a 'downsizer contribution' to their superannuation.

Furthermore, the report recommended that the age pension asset test exempt amounts up to $300,000 for singles and $600,000 for couples when the family home is sold or equity is accessed.

Boal mentioned that every measure would enable asset-rich, cash-poor retirees to live more comfortably and reduce the risk of depleting their retirement savings.

Additionally, these measures would address the family housing shortage.

Key Takeaways

• The Actuaries Institute has suggested that the Australian government include the value of family homes exceeding $2.1 million in the age pension asset test.
• The institute believed that this change would contribute to releasing part of the estimated $1.3 trillion in housing equity held by retirees, encouraging them to downsize.
• Senior groups, including National Seniors Australia and the Combined Pensioners and Superannuants Association, have rejected the proposal, arguing for other solutions.
• The report also recommends abolishing stamp duty for downsizers over 55 and allowing contributions into superannuation from those utilising equity release schemes, in addition to exempting certain amounts from the age pension asset test when the family home is sold or its equity is accessed.

What are your thoughts on the proposed changes to the age pension asset test? Share your experiences and opinions in the comments below.

 

[TheFoz]

Low Lifes.

 

[millsrj1953]

Hi I'm not infavour of including the family home.while mine is not 2.1 $ I feel there are other areas that need fixing. In my case I don't work but my wife still does 1-2 days a week and I get my pension reduced to the same amount as my wife. WHY

 

[Parrot]

I wholeheartedly agree with “ A “ if one can afford Luxury i.e. property worth
More than 1.5 M not forgetting their Holiday Home etc which adds to their income ..
Why should they expect or even get a hand out when there are many struggling to make ends meet..

 

[ros 1]

Do you have any idea how many retired farmers get no pension at all because the land they own exempts them. So why not houses. Many farmers in retirement struggle to put basic food on their table, do not have the money to drive into town like town and city retires do. I have enough money to drive into a major center once a month, so if I run out of anything that is it. no fresh items on the menu every day. but having said that I like it where I am. I have paid thousands in taxes over my working life, now I am discriminated against because I chose to retire to a small acreage. Is that really fair, when others get a pension for having paid very little taxes over their life. why does Australia discriminate against single disabled older Australians who choose to live in the country after having worked in a city most of their life.?.

 

[ChristyMahon]

When the aged pension was introduced (around 1951 if I remember) there was a lot of political argiebargie about it.

Labor wanted it paid for out of general revenue and they wanted it to be universal and un-means tested. The liberals of course resisted, and because it was a hot issue with an election coming, a compromise was reached so both parties could claim credit.

The compromise was that Labor's plan for a universal pension for all Australians, not means tested and sufficient to provide a decent living went through. However, it was to be paid for by a special levy of 6 1\2% of every person's income tax. Therefore, every payslip and each group certificate showed the amount of tax paid or to be paid and in a separate line, the amount of each person's contribution to the general aged pension fund was also shown.

During the Frazer government, John Howard was treasurer. As treasurer, he found himself facing an UNfunded and excessively generous Commonwealth Superannuation scheme operating separately for Commonwealth employees (including of course, politicians) (who were also beneficiaries - as tax payers and contributors - under the universal pension scheme).

Howard solved his problem, not by reforming the Commonwealth Super scheme, but by creating a new fund to underpin the Commonwealth super scheme. This is The Future Fund and it operates like a private fund, managed away from public interest, offshore.

It was set up by transfering the money from OUR pension fund into Howard's new Future Fund. At the same time, although we continued to pay the levy, our contributions towards our universal pension plan were no longer to be shown on pay slips or group certificates. Our universal pension fund died silently. From then, aged pensions have had to be met from general revenue. Without the massive funding asset we'd accrued, built up by our 6 1/2% contributions since 1951, and with a new funding crisis approaching as boomers aged, who would be going into retirement during the next couple of decades, all kinds of squeezes had to be invented to limit pension costs.

These amounted to minimising the share of GDP allocated to pensions. The national budget was bolstered by limiting pension payment amounts, by reducing eligibility, and by forcing retirees to use their savings to fund their needs, nevermind that the contributions of 6 1\2% were OUR savings, that had been stolen to fund political and Commonwealth public service superannuation.

Not only that!

The 6 1\2% levy has never been removed. There has never been any respite from the 6 1\2% levy after the line disappeared from our pay slips. It has simply been quietly, sinisterly and dishonestly folded into general tax obligations. Our children pay it today not realising it should be supplementing their superannuation.

Meanwhile, the Future Fund rolls along massively, more massively augmented afterwards by the funds from selling Telstra and the Commonwealth Bank ... both of course being assets paid for once again, by current retirees, their parents and grand parents.

Is any means test fair and appropriate given the history? Is it fair politicians and their servants should be living like high rollers when they retire on OUR money? We should not be turning on our fellows who've been clever enough to buy fine houses. We should be demanding that the Future Fund be redirected to supplying ALL retirees with a decent income.

What's a decent income?

Last time I looked, only South Korea (among OECD countries) shared less of the national cake with its elderly than we do (about 2% of GDP compared to Australia that shared about 4.5% of GDP). Meanwhile most countries of comparable wealth to Australia, shared between 7% of GDP (USA) and 14% (France). So Australia's aged pensioners, who've paid handsomely for their retirements, receive crumbs from the floor for their efforts, while across the waters, their peers get burgers with the works and canard a l'orange.

Pretty rotten. But it's a damn sight worse, in fact.

Because the OECD projection sees that share of GDP that Australia will be paying to its aged pensioners, will fall to 2.5% of GDP by 2025.

While a very few live pretty well on OUR savings, by next year our elderly who invested their retirement savings with our government, will be among the most disadvantaged in the world. Their pensions (measured as share of national income) will be less than a third of those awarded in even small countries like Ireland. Netherlands, New Zealand etc.

 

[Emelle]

hmm...interesting question. If I were to own a property valued at say $10m - would I feel any ethical or moral responsibility about getting a hand out from struggling, hard-working, tax-paying people? I would like to think I would.

My inlaws bought their home in what is now considered an affluent suburb over 60 years ago and valued at multiple $$$.
My MIL continues to live in their family home. There is absolutely no way in the world she would survive if they reduced her pension due to a real estate choice they made many decades ago. She worked hard to pay off their home. In response to your comment, NO she does not feel any moral obligation nor should she!!

 

[Jest]

they, the government will do what they want.

 

[Jest]

Personally I am tired of supporting asset rich;cash poor who can afford to sell properti/es to live. Some of us have lived on struggle street to get a modest home in a then modest neighborhood, which over time has put their 60yo fibro home within a higher value range. Not their problem really. A home is built within the house regardless of where in these cases.
Try getting to those with high quality assets, excluding home, above 1.5mil to downsize and look at the squeal. The power boat, Audi etc are they needed when accepting a govt aged pension aimed for those who have next to nothing? Average pensioner has problems buying food, rates, power on $500/week - so go rub Peter to pay Paul even if it does cost high flyer votes. there are plenty of low flyer votes to replace and will feel like voting for a more budget-level thinker. People forget what it is like down here when they get a few bob in the pocket or in jobs making rules for mates forgetting those others down here. If can afford luxury then don't need a pension.

i feel you are referring to a very small majority of people. I am not one bit jealous of anyone who has the money and the expertise to finance their life the way they want. after all what has that got to do with us? Most of these comments seem to have the green eyed monster of jealousy.

 

[Knell]

My inlaws bought their home in what is now considered an affluent suburb over 60 years ago and valued at multiple $$$.
My MIL continues to live in their family home. There is absolutely no way in the world she would survive if they reduced her pension due to a real estate choice they made many decades ago. She worked hard to pay off their home. In response to your comment, NO she does not feel any moral obligation nor should she!!

Well Emelle, I was speaking for myself - not your MIL! I could not care less about her moral obligations!

 

[CaroleAnne]

After kicking out all the retirees, who live in their own homes....where will they live? this suggested idea from faceless people is an absolute scandal and a disgrace. why should retirees who worked to buy a home and raise a family be penalised by greedy selfish people who have no idea what it is like to have no home. shame on them.

 

[Rain72]

Personally I am tired of supporting asset rich;cash poor who can afford to sell properti/es to live. Some of us have lived on struggle street to get a modest home in a then modest neighborhood, which over time has put their 60yo fibro home within a higher value range. Not their problem really. A home is built within the house regardless of where in these cases.
Try getting to those with high quality assets, excluding home, above 1.5mil to downsize and look at the squeal. The power boat, Audi etc are they needed when accepting a govt aged pension aimed for those who have next to nothing? Average pensioner has problems buying food, rates, power on $500/week - so go rub Peter to pay Paul even if it does cost high flyer votes. there are plenty of low flyer votes to replace and will feel like voting for a more budget-level thinker. People forget what it is like down here when they get a few bob in the pocket or in jobs making rules for mates forgetting those others down here. If can afford luxury then don't need a pension.

So you think people should be forced out of their homes, after they paid tax all their lives, while you continue to enjoy a handout from their children who are still paying tax? Just because someone's home has inflated in value over the years - either from them working hard to renovate and improve it or from demographic changes pushing up values in certain locations - doesn't make them wealthy, much less imply they own a boat (of any kind) or an Audi. And if they do, then they likely paid an enormous amount of tax over the years. Very few wealthy people draw a government pension. But a lot of people who own valuable homes NEED a pension for very genuine reasons. And who are you to assume they don't know what it's like to struggle? Many of them had a major struggle to get where they are.

My home isn't worth $2 million yet, but it might be in a few years. After a horrendous struggle, raising kids on an income less than unemployment benefits and battling through major illness, I managed - by working hard in the years after my kids were grown - to retire self-funded. I will qualify for a pension soon, after living on my savings for 12 years - during which time I have had to live on LESS income than I would have if I had fewer savings and got a pension. But apparently you think I should be forced out of the home I worked so hard for 30 years to pay for, or deprived of any retirement income? Really?

The current system encourages manipulation and punishes honesty. Anyone who is getting a pension they don't need is benefiting from a stupid system of means testing that will be far worse if family homes are included. We should STOP rewarding the irresponsible and the manipulators and encourage people to strive and live responsibly by paying EVERYONE a pension and taxing retirement income properly.