The nature of the Government’s retirement income review offers a unique opportunity to assess the impact of including the family home in the Age Pension assets test, says Heffron SMSF Solutions director Martin Heffron.
Mr Heffron believes the terms of reference of the retirement income review – establishing facts rather than making recommendations – offers the Government a chance to scrutinise such policies as the treatment of the family home on inter-generational equity, fiscal sustainability and efficiency, without political pressure.
“The generous treatment of the Australian family home for tax and benefit purposes is one of the most fiscally unsustainable policies in Australia,” Mr Heffron said. “It has many negative consequences and contributes to the sharp increase in homelessness we see in our city streets every day.
“Thankfully, there is nothing to stop the panel from reporting on the factual impact of this treatment on the sustainability of our current retirement income policy framework. I wish them well in their important work.”
Mr Heffron also hopes the review will clarify terms such as ‘retirement income adequacy’ as the range of opinions of what was adequate for individuals could open the review up to criticism and confusion, reports Money Management.
While the review’s terms of reference specifically focus on the three pillars of retirement income – a means-tested Age Pension, compulsory superannuation and voluntary savings – ownership of the primary residence has long been considered the de facto fourth pillar of Australia’s retirement income system.
The rapid increase in property value over the past few years has led many to argue that the family home should be included in the assets test. However, the Federal Treasurer has all but ruled it out.
More important than including the home to the assets test, says Per Capita’s Emma Dawson and Myfan Jordan, is to increase assistance for renting pensioners.
“Renters in the 55–64 age cohort have risen from 14.7 per cent to 21 per cent in the past 20 years alone,” they said in YourLifeChoices’ September edition of the Retirement Affordability Index. “Worryingly, this includes former homeowners forced out by mortgage foreclosure and life events such as family breakdown, ill health and unemployment.
“The most immediate solution is to increase Commonwealth Rent Assistance (CRA) for those in receipt of social security payments.
“The retirement income review provides us with an opportunity to think more broadly about what makes it possible for Australians to live a good life in retirement. If that is our collective goal, we must shift how we think of the home, away from its role as merely a financial pillar of retirement income.
“Having a place to call home, one that cannot be taken from us, is perhaps the greatest source of security there is. Providing that to all Australians should be the fundamental aim of retirement income policy.”
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