Calls for Family Home to Be Included in the Age Pension Asset Test

In recent years, a troubling conversation has been gaining traction: should the family home be included in the age pension asset test? For generations, we’ve viewed our homes as sacred – our “nest eggs” – something to safeguard and perhaps pass down to our children. 

But now, new research from the Actuaries Institute is challenging that long-held belief. Their paper, “More Than Just a Roof: Changing the Narrative on the Role of the Home,” suggests that our homes could be targeted as a crucial part of our retirement income, alongside the age pension, superannuation, and personal savings.

The Case for Change – Or Is It?

Andrew Boal, an actuary and partner at Deloitte, highlights a significant issue: while many retirees proudly own their homes, they often have very little in superannuation – usually less than $250,000. This leaves them asset-rich but income-poor, a frustrating reality for many. With property prices skyrocketed over the past few decades, this disparity has only widened. Boal argues that by tapping into the equity in their homes, retirees could significantly boost their income and live more comfortably.

Speculation on Government Adoption – A Cause for Concern

There is growing speculation that the Australian government may be eyeing this policy for adoption in the near future. The potential implications are profound, not just for retirees’ financial stability but for the broader economy as well. Including the family home in the age pension asset test could unlock significant resources, providing an income boost for retirees while simultaneously easing the housing supply crisis.

But at what cost? For many pensioners, this idea feels like a betrayal, a slap in the face after decades of hard work and careful planning. The thought of their cherished family home being counted against them in the age pension asset test stirs deep-seated fears and resentment.

Is this really the solution we need? Rethinking the role of the family home in retirement planning might unlock value for some, but it also risks undermining the security and peace of mind that older Australians have long relied on. It’s a bold idea, yes – but one that could have a devastating impact on the very people it’s meant to help.

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Unlocking Home Equity

Imagine if retirees could access just 20% of the $1.3 trillion in housing equity they hold. That’s a whopping $260 billion that could be used to support them over their retirement years. To make this a reality, Boal and his team propose several policy changes:

• Removing or refunding stamp duty for over 55s who choose to downsize: This would make it easier for retirees to move into smaller, more manageable homes, freeing up larger properties for young families.
• Allowing retirees to contribute to their superannuation with funds from equity release schemes: This would help bolster their super funds.
• Relaxing the age pension means test for those who tap into their home equity: This would provide retirees with additional income without immediately affecting their pension eligibility.

Including the Family Home in the Age Pension Means Test

One of the more controversial proposals being discussed is the gradual inclusion of part of the family home’s value in the age pension means test. Under this plan, properties valued above $2.1 million would be affected, meaning that any value exceeding this threshold could be counted against a pensioner’s eligibility.

This idea challenges the traditional view of our homes – not just as places to live or something to pass on to the next generation, but as financial assets that could be tapped into to support us in our later years. This move could affect tens of thousands of older Australians who have worked hard to secure a stable and comfortable retirement.

The suggestion has sparked significant debate, as many see it as a fundamental shift in the way we value and use our most personal and cherished asset – our family home.

Reverse Mortgage: A Practical Approach

One practical method for accessing home equity is through a Reverse Mortgage. Also known as home equity loan, this highly-regulated financial product allows homeowners to borrow money against the value of their home without having to sell it. 

The loan can be taken as a lump sum, a line of credit, or regular payments, providing retirees with additional income while they continue to live in their home.

• No regular repayments: Instead, the loan is repaid when the homeowner sells the house, moves out, or passes away.
• Flexible financial resource: This can be an attractive option for retirees who want to maintain their lifestyle without the immediate need to downsize or sell their home.

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So, what does this mean for everyday retirees? Well, imagine being able to enjoy your retirement years without constantly worrying about money. 

By accessing the equity in your home, you could have extra income to travel, spoil your grandkids, or simply live more comfortably. This doesn’t mean you have to sell your home or move out. With a reverse mortgage, you can stay right where you are, tapping into your home’s value while continuing to live in it.

These changes could also help address the broader issue of housing availability. By encouraging older Australians to downsize, more large family homes would become available for younger families, helping to ease the housing crisis.

Want to learn more about Reverse Mortgage? Download your FREE Reverse Mortgage GUIDE. 

Ready to Apply? You can now check your eligibility online or call Seniors First on 1300 745 745. 

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult a licensed financial advisor before you make any decision.