Despite its unpopularity, including the family home in the assets test for the Age Pension is the idea that just won’t go away.
The Certified Practising Accountants of Australia (CPA) conducted a policy think tank last November, asking seven teams to formulate changes in the retirement system to address issues around the ageing population. The winning team put forward a proposal to include the family home in the Age Pension assets test.
YourLifeChoices has polled members on this topic and an overwhelming 85 per cent of the 2481 respondents said the family home should not be part of the assets test.
Most responses were highly critical of the concept of including the family home in the assets test for an Age Pension – and many were critical of the assets test generally.
Yet this is an idea that regularly comes up in policy debates.
Read more: Calls to include house in means test
The CPA policy think tank included seven teams given one week to formulate policy proposals that would allow the retirement system to be restructured to ensure that the standard of living for retirees was maintained, while allowing for appropriate aged care and healthcare support to be available for all Australians in retirement.
The winning team focused its proposals on ensuring that more Australians owned their own home at retirement, but then advocated including the home in the assets test and redistributing those funds more equitably to those renting in retirement, as well as paying for aged care and healthcare services.
Read more: Merge Age Pension income and asset tests: Actuaries Institute
Khatiza Brown, a member of the winning team of CPAs, said that if more people owned their home at retirement, including it in the Age Pension assets test could reduce the number of people accessing the Age Pension.
She explained that this would increase the Age Pension funds that were available to renters or those in need and would lead to a more equitable system.
“Our approach was to increase home ownership as a means to improve people’s retirement income, which is not going to capture everyone. This is why we also looked at the Age Pension and proposed including the principal home of homeowners in the means test,” Ms Brown said.
Read more: Could family home exemption be a victim of stimulus package debt?
“At the moment, a homeowner can actually get the same amount of Age Pension as a non-homeowner, because the principal home is not included in the means test.
“If we reduce the number of people reliant on the Age Pension then we can redirect those savings to aged care and healthcare services,” Ms Brown added.
The winning team suggested that declining home ownership rates would present a financial timebomb, so they focused on this as one of the key issues they would need to look at when formulating their plans to change the retirement system.
Liam Smith, another member of the winning team, explained that their proposal included the ability for workers to draw on their superannuation for home deposits.
“By 2056 just two-thirds of retirees will own their homes, down from nearly 80 per cent today,” Mr Smith explained.
“Our angle is that it is a bit absurd for someone to miss out on the compounding benefits of home ownership and have all their money in a superannuation account attracting fees.
“We proposed people under the age of 40 being able to withdraw 50 per cent of the balance specifically for a home fund,” said Mr Smith.
The team also argued that increased home ownership could open doors for retirees to access, create and maintain savings through equity release options (reverse mortgages and home reversion) and by downsizing to a smaller home.
Do you think the family home should be included in the means tests for the Age Pension? Are you frustrated at how often this solution is raised by policy experts?
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