Home equity drawdowns threaten aged care funding
An approach to retirement incomes policy which saw people encouraged to draw down heavily on the equity in their house would carry with it the risk of the residential aged care funding arrangements falling over, according to Council of the Ageing chief executive, Ian Yates.
Yates has told a hearing of the Senate Economic Committee that his organisation would in no way advocate such a policy approach but that the Government needed to think about the implications of such a move.
"When we think about retirement incomes, we think about what people have to pay for in terms of their daily expenses of life, but we also think about what they have to provide for in terms of health and aged-care costs," he said. "Similarly, for government to think about those things, policy around retirement incomes clearly affects, for example only, user-pays policies in aged care."
"For example, if you were to have a system which encouraged people to draw down heavily on the equity of their house — I am not advocating it; I am just saying that if you had that system — our current residential aged care funding arrangements would fall over, because they rely heavily on people — most people — using the house to pay for an accommodation bond to buy into residential aged care," Yates said.
He said it needed to be understood that these things are interrelated.
"So these things are interrelated, which is why we have argued for an overall look at retirement income policy and have suggested that the objective of that could actually talk about adequacy, but also talk about fair and fiscally sustainable," Yates said.
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