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.
[ RELATED POST: Limited Age Pension income is causing financial stress. Is further cost-cutting the answer? ]
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.
[ RELATED POST: The Four Types of Australian Retirees: Which One Are You? ]
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.
No it should not be included. House prizes rise with time and this allows retirees the opportunity to release the homes equity so that they can maintain their home or health needs as superannuation does not last for long period. Once retired income is stagnant!
Keep your greedy hands off our homes. We worked and paid for them and all the while paying our taxes. What gives the government the right to stick their grubby little hands in to our assets. Piss off.
a $3 million cap on own home for a full pension seems very fair. Not sure how to Estimate the value year by year?
Thanks Jim. I’d imagine that if the government did bring in a policy like this they would index it annually to movements in the median house price. Eg; if the house prices rose 3% in one year, tha cap would then increase from $3,000,000 to $3,000,090. Similar to how the Age Pension is indexed to the consumer price index (CPI)
My children will never own a home now the government wants me to make more money for a bank with a reverse mortgage leaving my children with nothing.
I have worked hard all my life and anyone who has a 2million asset either by working hard or because the area they live in has skyrocketed over the years should not be taxed. The people trying to enforce this have wasted taxpayers money and done all sorts of things to launder money S well with their scams on. Kim ate change etc etc. they even want to put a death tax on what people who have worked hard to get. The answer is NO NO NO.
Let’s really get down to it. As an ex Serviceman and Civilian, I have participated in the Defense of the Realm for 15 years or so. A damn site more than the majority of the Bludgers (On both sides) of parliament at the moment. One can assume I would not easily allow the Government of the day to interfere with an Asset I have worked AND fought for….. Maybe, just maybe, it’s TIME for a regime change.The disruptive age is truly upon us all, and we desperately need new YOUNG progressive politicians.
the concept is reasonable to progress, but the value of the house itself in the calculation is complex. there should be some form of ‘cap’ before the pension is impacted but $2m seems pretty low
Thanks CJ. If one accepts the argument for some policy change in this area (and it’s clear that most people on this comment thread do not), then deciding the threshold is the tricky bit. For instance, a $3mill cap would not affect the vast majority of retired homeowners. The median house price in Australia’s combined capital cities is now $997,963. The median dwelling value in Australia’s combined regional areas is $630,565. I wonder: if a government were able to pledge better services, or even an increase in base level Age Pension, would a $3 mill cap be acceptable to the average retired homeowner who would continue to receive the full age pension?
When you are in your later years the thought of losing one’s home as a result of so many politicians failing to create sensible policies is very hard to take. The rich constantly get richer by getting governments to take from the middle class.
So, leave the house alone, they are not that valuable until you are dead. Valuers constantly undervalue a home as does the State Valuer general. Then get your house valued for insurance then watch an unattainable value. At least you give 43% of the value which is already a bit undercooked.
The family home should not be included in the assets test. Today’s house values do not reflect the financial input into the home, family’s have made over the years. It is bad enough for the Government to include husbands earning in the wife’s assessment to also include the family home would I should imagine, leave aged pensioners with a serious shortfall in their pensions.
couldn’t agree more John
Downsizing is not an option if the home is only big enough for one couple. Size as well as Market Value should be taken into consideration.
Did I get a big sniff of absolute common sense then Malcolm??
The family home should absolutely not be included. This divisive government needs to listen and stop dictating what we can and cannot do with our own assets. Very easy to sit in your ivory tower on a 6-figure income and make decisions thinking that you know best.
Oh, Meredith. There is an answer. THE BALLOT BOX. Get rid of the lot of ’em’. AND bring in new YOUNG progressive Pollies. My God, we need them.
Definitely not. It is not our fault property prices have gone through the roof. Trying to force us out of our homes when we are ready to start enjoying life they are causing so much stress and heartache for the elderly. It would be a different story if it was them. There time will come!!!
This ALP / GREENS communist government are killing Australia and dividing us as hard working loyal citizens many who have given their lives for the future of our true Australia. Our homes we fought, worked hard to achieve our peace of mind in retirement should NEVER be means tested. The capital gain over many years is the natural growth of any investment of our endurance. Do not vote socialist ALP/ GREENS ever.
IF SENIORS HAVE BEEN LIVING IN THE FAMILY HOME FOR MANY YEARS IE OVER 20 YEARS IT SHOULD NOT BE INCLUDED IN ASSET TEST
These clowns originally proposed $1.2 million as the ceiling. Imagine how many pensions would have been decimated had that been adopted by the anti wealth Laborites today! The present asset test is bad enough without this proposed theft. Sell your family home and buy what? A rundown shack in an outer suburb? These clowns also claim it would free up housing stock for first home buyers. They can’t afford million plus homes, how are they suddenly to afford a home that costs over 2.1 million? And what about property price increases? No mention of that from this ‘think tank’! They’re just another group of Pension Plunderers whose ideology is to drive all seniors into poverty.
The family home should not be included as some house values have gone up purely due to their location and are quite modest homes. People who have worked hard and been self-sufficient should not be penalised because they choose to live as long as they can in a place that they have connection with. I overheard a taxi driver recently who was worried as his land value had gone up significantly in 2 years and now he was scratching to be able to pay rates. His house and land was over $2m because it is on a beachfront and he bought it very cheap over 35 years ago. These homes were built or bought to live in – not as investment.
I can’t see why any asset that is not earning you an income should be means tested and especially the family home.
I would also like to know what difference it makes to government bodies if a person on a pension works and if applicable because of the amount pays tax on that income without affecting the pension.
We keep being told that the ageing population is affected the country, well let us work if we want to and don’t jeopardize our pension.
The Greens are pushing for this as part of their Communist manifesto.
Vote for anyone else but never ‘Green’.
Thousands of pensioners COULDNT care less about the value of their home. I’m just happy to have a home in today’s uncertainty. So many factors determine its value and most are out of my control. Leave pensioners alone to live out their lives in peace with their entitlements.
No it isn’t fair to penalise someone just because their home is valuable. We are encouraged to stay in our family home as long as possible. This is forcing people to sell up and find somewhere else just because it is valuable. You can live in a lovely home but it won’t feed or clothe you!!
Well I will be in the minority but yes sitting on a $2m asset or more and still get the pension is not right. We have no inheritance tax at this stage so people in that position can get extra income by a reverse mortgage. Centre link have a scheme with a very low interest rate. So people need not leave their home or acreage with this scheme
Hadyn
The idea is OK for very wealthy people but a pretty average person’s house is worth over a million dollars these days, so the starting point for considering the home as an asset would need to start pretty high. They would need to make accessing equity in the home much more attractive for this to work. Inheritance becomes an issue. Our kids stand to inherit at least $2m each (wow). Yet our Super will run out fairly soon and our house is worth just on $1m. I have no concern at all about their inheritance.
$2M in todays world is low for a home value
I agree the pension should be reduced or not available for property owners with a home property valued more than say $3M
We all have worked hard and paid a fair amount of tax both personal and “other” over our working lives to get into a position whereby we own our home property so we are entitled to a full aged pension albeit with some conditions
Thanks Roland. Yes I can’t see any government using a cap as low as $2.1 million in home value. But some may argue it’s hard to justify a person with a house worth $3 mill+ should still be be receiving 100% of the full pension.
The home should never be used to reduce pension. A person who has worked all their life should not be penalised because the of value of their home…! You cant eat bricks and mortar. Similarly, why should someone who worked hard have to downsize when they retire. If a retiree has income creating assets, outside of their primary residence, then yes their pension should be reduced…! Why should self funded retirees be penalised…?
Thanks kristine, you raisee some really interesting points. I guess some would say you can ‘eat bricks ansd mortar’. Releasing home equity to fund living costs is exactly what a Reverse Mortgage does. Regarding downsizing, the government has created policies such as the Downsizer Super Contribution to encourage this https://seniorsfirst.com.au/releasing-home-equity/downsizing-contribution-rules-5-things-you-need-to-know/ I think there is possibly a distinction to be made between the owner occupied property as a financial asset (which it clearly is), and someone’s ‘home’ which often has very strong emotional value. It’s tricky disentangling the two.
Why should retirees be forced out of their homes, that they have spent a lifetime to acquire. Nobody asks the question on youth allowance and the expensive high powered cars they drive or the latest iPhones they carry? Leave us oldies alone to enjoy the fruits of our labour
No way, leave us old folk alone we did our bit, so you all can do yours. Leave home alone.
That’s bloody ridiculous I have 22 acres and I’m not permitted to do anything with it
I live fortnightly with pension which doesn’t cover all bills
This proposal would kill me
I do not agree that the family home should be taken into account. Recently on my radio show I encouraged people to contact their federal member to advise that they do not agree with the proposal
Thanks Peter, it’s a hot topic for sure. Where can people hear you radio show?
Absolutely not. I’ve skated all my life for my home and now I’m going to get double taxed! I have no super so I’d have to sell and buy what? There is nowhere to rent either.