Age Pension means test prevents rational decision-making
Rules exempting the family home from the Age Pension means test are preventing retirees from make rational housing decision, the Actuaries Institute believes.
The institute's green paper, ‘Unlocking Housing Wealth — options to meet retirement needs', reported that Australian retirees had the second lowest income levels of OECD countries.
Speaking to Money Management, Catherine Nance, the convenor of the Actuaries Institute's working group who published the green paper, called on the Government to break down barriers preventing people from accessing equity from their homes in retirement.
"The major stop on them making decisions is the Age Pension means test, because the house being the only exempt asset, if you want to sell it and go into a smaller place or an independent living unit, or if you want to access it through a financial product like a reverse mortgage, anything you release from your home potentially gets caught up in the Age Pension means test and can reduce the Age Pension you're getting," she said.
"We felt there was a case to be made for saying rather than just forcing people to stay in their homes beyond the time when it's appropriate, why don't we allow a partial protection up to a certain limit from the Age Pension means testing for amounts accessed by older people when they sell down or access equity through their house?"
Nance also suggested that a "first time buyers" style exemption from stamp duty would also encourage retirees to access equity from their homes, and give them "a better quality of life".
"At that point in age a lot of people don't want to just pay $30,000 to the state government in stamp duty, which is like a dead tax, simply to move to a slightly smaller house, so we feel there is a case for looking at stamp duty relief for older people," she said.
Homesafe Solutions managing director, Peter Szabo, welcomed the Actuaries Institute papers, describing the issues as the "elephant in the room".
"The family home is quite literally the elephant in the room and government can no longer ignore the issue with Australia having the highest proportion of home ownership amongst seniors in the developed world," he said.
"Assisting senior Australians to address the very real challenges of funding their lives in retirement needs to be acknowledged as a priority and decision makers must support options to allow retirees access to the equity in their homes."
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