Pensioners to hold onto houses

Pensioners will be better off holding onto their family homes or buying more expensive houses, as an unexpected consequence of the changes to the pension assets test.

Middletons Securities adviser, David Middleton, said savvy investors could end up getting more through the Age Pension than they currently are "and have a nicer house to live in", by taking advantage of the new rules announced in the Budget.

With pensioners facing a 7.8 per cent per annum cut to their Age Pension on assessed capital above the lower threshold, their homes could become "a bricks and mortar bank account".

"This might just ring the death bell on the days where an empty-nester couple chooses to downsize from the family home to something more manageable — and instead we may see them look to buy something that is actually more expensive," he said.

"The bottom line, is that a home-owning couple with $800,000 in assets will soon see their Aged Pension fall by around $14,000, and that's quite a bit," he said.

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"By increasing the value of their home by trading up or doing renovations they will get a lot of extra pension. For example, a pensionable couple with $800,000 in investment capital would currently get interest income of around $24,000, along with an Aged Pension of $14,000 - making for a total of $38,000 income."

"Under the new rules their aged pension would all but disappear, but if they added $300,000 to the value of their home their interest income would fall to $15,000 and under the new rules they would have pension income of $23,000 — more than they're getting now."