Minister flags review of Age Pension and the family home

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As debate continues over next year’s legislated increase in super contributions, and as Australia waits on the federal government’s response to its Retirement Income Review, the assistant superannuation minister has flagged a review of the Age Pension and the family home.

Super sector leaders and everyday Australians have repeatedly called for a moratorium on change in the sector, but Senator Jane Hume appears to be having none of that.

She has slapped down calls to cease reform of the system in favour of cementing policy stability. And she has hinted that any further reform would also encompass the Age Pension and voluntary saving arrangements.

“One of things we keep hearing is ‘stop tinkering and making changes’,’’ she told The Australian. “Well, you know what? From the members’ perspective, they are seeing improved efficiency from these changes.

“I can’t give away too much ahead of the release (of the Retirement Income Review) but one of the things the review focused on explicitly was the interaction between different pillars of the retirement system.”

The review was announced on 27 September 2019 and handed to Treasury on 24 July this year. It was recommended by the Productivity Commission to assess the state of the retirement income system and how it will perform as Australians live longer and the population ages.

It set out to consider “the incentives for people to self-fund their retirement, the fiscal sustainability of the system, the role of the three pillars of the retirement income system, and the level of support provided to different cohorts across time”.

More than a month since the handover, there has been no official government response.

Senator Hume was criticised last week after saying she was ambivalent about the legislated increase in super – from 9.5 to 10 per cent – going ahead, adding that super attracted too much attention compared to the other pillars.

“A good retirement outcome is not driven solely by one’s super balance,” she said this week. “It’s about the other pillars as well: [the] Age Pension and voluntary savings outside of super, including the home.

“There are also payments in kind: things like health and aged care, the fact that those things are heavily subsidised matters when we compare our system to those of other countries.”

The Age Pension is indexed twice yearly and calculated according to the greater of the movement in the Consumer Price Index (CPI) or the Pensioner and Beneficiary Living Cost Index (PBLCI). It is then ‘benchmarked’ against a percentage of Male Total Average Weekly Earnings (MTAWE).

Indexing pension rates to CPI, says the government, “maintains their real value over time”.

The case for continuing to exclude the family home from the assets test for the Age Pension has drawn many critics in recent years. The argument presented by Deloitte Access Economics’ Chris Richardson is typical.

“Including the family home [in the assets test] is still the right thing to do,” he said. “You have some people who have incredibly valuable homes and yet qualify for the pension.”

A Productivity Commission report claims that the federal government would save up to $6 billion a year by including the family home in the Age Pension assets test.

The report, Housing Decisions of Older Australians, states that around 360,000 pensioners would lose their entitlements if the family home was included in the assets test.

It says the move could also make Australia’s tax system fairer, stating that asset-rich and cash-poor retirees could live a better quality of life in retirement if they were to draw on the equity of their assets instead of claiming a pension.

The Productivity Commission believes “there is a strong case on equity grounds for setting limits on the value of the principal residence that is exempt from the Age Pension means test” but acknowledged that it couldn’t happen in the immediate future.

A well-placed super industry source told The Australian the sector feared the Retirement Income Review would “undermine the raison d’etre of the whole sector”.

“Hardly any of the submissions were about the other two pillars, so who knows what’s coming on that front,” the source said.

The Department of Social Services confirmed last week that age pensioners would not receive an automatic indexation increase on 20 September because inflation had gone backwards. It is the first time since 1997 the pension hasn’t risen with indexation.

Prime Minister Scott Morrison later suggested there might be an interim sweetener for pensioners, but that was quickly watered down by federal finance minister Mathias Cormann, who said any additional government support for pensioners would be “a matter to be determined in the context of the budget”.

Are you fearful of what might eventuate from the Retirement Income Review? Do you almost feel it is inevitable that the family home will one day be included in the assets test for the Age Pension?

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Written by Janelle Ward


Total Comments: 147
  1. 0

    A universal age pension would solve all this. Have people contribute to a national pension during their working lives through their tax. If you’ve worked long enough and paid into the system then the age pension is automatic and the amount is dependent on the years worked. This does not exclude private pensions that are run by companies/institutions that you work for. This means that everyone has a base pension for life and your home has nothing to do with it. If you’ve never worked you’re not entitled to a pension. It would save a lot of admin and be fairer. Child care credits for those looking after children would be included and those with disabilities etc would also be catered for. The constant changes to super and state pension rules inject a lot of anxiety into a system where nobody feels secure as the rules change all the time.

    • 0

      They tried that. Universal pension for all, in 1946, collected through a 7.5% increase in income tax. Forget the date, but years later the LNP government wanted to makre government, and found that the superannuation owed to the public servants being sacked was much greater than than the funds they had, and the superannuation funds collected since 1946 was there to be raided to pay for superannuation entitlements. Now, also consider what would happen if business had unfunded super for their employees. It is a jailable offense. Legalised grabbing the pension fund, no more universal pension, but no decrease of 7.5% income tax paid. New fund started, but not for working Australians, only for parliamentarians, paid for by all taxpayers.
      People have worked all their lives for some financial security, most have gone without luxuries to pay off a mortgage over 20 0or 30 years, to pay for a house, a non income producing asset, to get a bit of financial security in retirement. Now there are attempts to include the home as an asset in the asset test for an age pension, a test that already excludes a pension entitlement, which would not exlude a person on an income test. Using the family home with a reverse mortgage has another problem. If, due to old age infirmaty, you need to go into aged care, the entry fee is a refundable loan to the aged care provider, plus a massive ongoing fee based on your assets, and what do you get for that, a single bed in a private aged care centre that cares only for the profits they can make, when the care received is inferior to that of the prison population.

    • 0

      Agree with you flowerpot. Just pay everyone a pension and it will sort itself out via the tax system. With this system, those who are thrifty and can save cumulatively, can enjoy their savings for a rainy day. But that is not possible under the current system. The more you save, the more pension they take from you. The day of reckoning for the major political pArties is nigh.

    • 0

      Uk has universal pension. It works well

    • 0

      Flowerpot you speak the common language of all. Changes are made to move monies to the ‘new’ programs that will win elections and bugger the past people who put in. The ones introducing changes and ‘efficiencies’ have an agenda that they do not disclose but you can bet their superannuation it is ultimately for their reward not those that are dependent on the past legisglated laws and agreements. Keep on contributing, like your work

    • 0

      I agree with much of what you and others have said, esp re a universal aged pension which is a logical large ongoing saving for govt. A bureaucracy eliminating way to go as the aged are then just in the tax system along with everyone else.
      The only thing I have issue is with this part
      “If you’ve never worked you’re not entitled to a pension”‘. So they are just put out on the street to beg and starve ??

    • 0

      I don’t think so johnp. I think there should be a sustenance-level (very minimal) pension for folk who never worked.- perhaps repayable from their estate on death if they leave anything behind.

    • 0

      I see where you are going Youngagina – perhaps the universal portion (part A) should be capped at sustenance (e.g. like austudy, youth allowance etc) and the quality of life supplement portion (part B) capped by actuarial formula based upon estimated remaining years and amount of income taxes paid. In other words, those non-workers receive part A only as universal pension, while the retired workers receive parts A and B. In that way those who have paid lots of income tax will be better looked after in retirement than those who have not.

    • 0

      Youngagain said
      ‘I don’t think so johnp. I think there should be a sustenance-level (very minimal) pension for folk who never worked.- perhaps repayable from their estate on death if they leave anything behind. ‘

      If they have never worked how would they have any estate??

    • 0

      Possible inheritances

  2. 1

    I am a single, retired police officer. I was stationed within an inner city Command, where cost of living and housing was high. Because I was stationed at this Command from the beginning, my attempts to transfer to a smaller town, where cost of living was lower, did not eventuate. I did not earn a big wage, but I saved, and did without a lot to ensure I paid off my modest two bedroom apartment, located 4 km from the city. No overseas holidays, no eating out, no nice clothes, and little entertainment. Due to the cost of my apartment, I had to place every cent into paying down the mortgage prior to my retirement. Thus, I DO NOT AGREE with my apartment being included in the asset test when determining whether or not I am eligible for an OAP. I did the hard yards already, and I do not feel I should be penalised again, at the end of my life. My house is my castle, and is where I feel safe. I was not given this house, I earned it, and I paid for it. If I saw the value of my apartment continue to depreciate because I was drawing on its value to pay me a ‘pension’, it would cause me much anxiety. What happens when there is no more value left on my apartment? Do I get thrown out, and the bank sells the apartment? I might very well receive an OAP, but I will be thrown out of my apartment to boot? I am totally against this proposal. It does not pass the pub test.

    • 0

      Coogee – I am ABSOLUTELY with you as I am very like you. I am single, worked on parents farm (who did not own it – were share-farming) till late 30’s. Walked out with nothing but my car, horse float, minimal furniture and 2 horses. And an 11 yo daughter after my partner decided farm life wasn’t for him. Only started working then, in any job I could find, mostly low paid. But boy did I work! Sometimes 3 jobs, rarely going out, but at age 44 scraped enough to buy a dump of a place in a farmland area. Bank was even hesitant to loan me money. But I worked by butt off – just me, no one helping me, giving me anything, no 1st home owners grant, no inheritance, lotto win. Just my bloody hard work. Like you – NOW my home is surrounded by modern homes, due to urban creep, and now a desirable area.
      My absolute major priority was paying off my home, as well as providing a safe secure home and education for my daughter. I saw many of my similar aged friends poo-poo me for not joining in with them. I have had ONE O/S trip to NZ, have only recently sold my 21yo car, and the only designer gear I wear is if I can find it in an op shop. NOW they are jealous because I own a home. I worked bloody hard to do things around my house – never got anything done without having the money. And ALL of that, including the mortgage, were paid for with after tax money.
      My house is by no means a mansion – 2 B/R, fully fenced, solar, with small pool, but absolutely everything I NEED for me, not just WANT. At one stage I did rent out my house to work in a rural Qld town for a good job, but there would be no way, absolutely no way I could live in a remote town.
      I too am sick of being penalised because I worked hard, paid taxes, and put a roof over my head. It’s getting to the stage where if you DON’T financially plan for the future, you are better off. And this rule would only create a huge level of further government waste. How can you value a home? – it’s only worth what people can sell it for. You could build the same mansion in Bondi and Birdsville – but I can guarantee they wouldn’t be assessed the same by Centrelink.
      I am on the aged pension because I could not save enough to be self funded. With this stupidity, MP’s don’t have to worry! Not when they can claim $276 PER DAY for ‘expense’. So what if you or I need money? – do we sell off a bedroom? Or maybe the bathroom?
      I too am totally against this proposal. I don’t give a hoot what the property is worth. It is YOUR HOME. Not a bargaining tool for Centrelink to screw you out of every cent they can.

    • 0

      I totally agree CoogeeGuy. I’ve been in my home for 45yrs and it now stands in a high value supburb but I don’t want to leave my family home. Keep the family home clear of any asset tests.

    • 0

      Pity help any political party/politician who tries this one on. The majority of hard-working home owners, the pillars of our society, will very quickly end their cushy career.

    • 0

      Totally agree Coffee & sunny. I’m in same situation. Always been single, worked in low paying jobs, what ever I could find. No holidays o/s, old car, now on aged pension with minimal super. But I own my home. Like sunny, I too know I lost some friends because I was always saying no to their invitations to go on outings and holidays. They too said I was stupid to be working for a bank, but now that they too are at aged pension age, some are complaining ‘how can I afford to live on pension and pay private rent?’
      Now suddenly they are envious of my years of hard work. My house is small and old but I have made it my home by spending money, after tax money, on making it comfortable for me. The govt has no right to now penalise me for my hard work. I don’t care how much any house is valued at, for any person on the pension. If it’s grown in value, they should not be penalised.

    • 0

      Coogee quite a few comments about your life..


    • 0

      Coogee, you have said it all and deserve everything you have worked hard for and saved for. Congratulations on doing a tough job, a job many of us couldn’t do. Your situation is becoming too common and you and many others like you (and me) who have put in and helped build this country and its health system deserve some cred for doing so. We have all learned that pollies change their spots according to what they think, not what they deserve. We have saved and worked based on ethics and standards of the past and the new goal posts are rubbery and move along the boundary. You put in, you deserve to get back and no debate. You want to bludge ( and wouldn’t we like to do it sometimes ) then you get what a bludger deserves … didley squat for that great bludging time. Yes sometimes there are no options but you make the choice you get the fruit of your decision. Those who worked for this country, defended it, or helped build it deserve their worth.

  3. 0

    The title of the article seems a little alarmist given the information in the article. If the family home were ever included in the assets test it would probably require both sides of politics to agree anyhow given the current setup in the Senate.
    Also remember that the family home is already included in the calculation of the assets threshold.

  4. 0

    Good luck getting anything like this through the senate, senator.
    Unless there is a universal pension, this issue will persist.

  5. 0

    If a handful of politicians can make a decision ,on one condition
    We have 20,000,000 plus people agree to the pension and perks the said group of decision makers get
    Only fair

  6. 0

    A universal system where everyone gets the pension is totally illogical. Where would you find the extra billions to fund such a scheme? Remember, it’s not the government who pays, it’s the present working taxpayer and future generations of taxpayers who pay. Besides, there are some major flaws. What incentive would I have to work hard, save money for future recessions, pay off a mortgage (don’t forget when paying off a mortgage, you use after tax savings). For the lazy ones, absolutely none.

    You don’t think (pandemic aside) whilst I’m working, I wouldn’t like to go overseas twice a year, visit the most interesting places, wine and dine, chat up new friends, buy a yacht, buy an expensive car and avoid a life long mortgage and its repayments. So why should I save as I grow through life if I’m guaranteed retirement?

    And where am I going to retire? If I have no home, a good aged care home costs a $45,000 per year. Plus rent, ie $28,800. that’s $73, 800. On top of that, there are fixed living costs like food, clothing, power, running a car, insurances, telephone, water and sewerage and household consumables. By not being encouraged to save, I’ll have no other income except the fixed aged pension, so I’ll be about $30,000 -$40,000 short every year!

    Use your head and do your sums. The present system only works because you do get a part pension but that’s all. If you include the family home in the assets test, the system will fall apart. The only option left is if this mischievous LNP Jane Hume gets the boot and so too the LNP crap party. What’s driving the so and so? Is it a better position and status in the LNP, or does she like sucking up to ScoMo and Kormann?
    Is she preparing the mood of the population when ScMo finally wields the axe? Otherwise we will mount a class action suite against the legislation and see Kormann and Co. bite the dust! Maybe it’s time for all existing pensioners to rise up and defeat this two faced federal government sooner rather than later.

    At least this should make future governments think twice before repeatedly annoying and penalising pensioners.

    • 0

      One source of funding would come from the thousands of people employed to administrate the current system, plus the cost of the premises and all associated costs. The cost to have such a complex system that currently exists is designed to employ as many people as possible and that’s for starters. NZ and the UK manage a universal system, why should Australia be different ?

    • 0

      I don’t think you’re using your head at all JoJozep. A universal pension is logical, totally. Billions will be saved just in the current administration of a very unfair, extremely complex & broken system. Billions more will be generated through the tax office as ALL income will come under the current tax rules on earning. No more tax free super generated income. Wealthy retirees who don’t pay tax under the tax free super schemes will now be paying tax but also will get a pension.
      I never ever begrudged my grandparents or parents getting the pension while I was working & paying tax.
      And from your sums I would suggested you never retire from working, ever lol

    • 0

      JoJozep, where would the extra money come from? It SHOULD come from ending the grossly unfair handouts to the wealthy through massive superannuation tax concessions that favour the high paid and works with an unfair pension system to penalize people who, despite a relatively low income, manage to save.

      Superannuation tax concessions are costing the country much more than the total cost of the OAP, and the vast majority of the benefit goes to high income earners. Make the concessions fair and there would be mega-billions to put towards pensions for all aged folk. Add to that, a fair tax system would even out any pension payments to the well off, so they would make no net gain. The result would be a much fairer and simpler system with none of the current incentives to manipulate or reduce savings because the penalty for retiring with savings is so harsh.

    • 0

      “we will mount a class action suite [sic] against the legislation and see Kormann and Co. bite the dust!” ROFL you’re dreaming JoJo.

  7. 0

    “Are you fearful of what might eventuate from the Retirement Income Review? Do you almost feel it is inevitable that the family home will one day be included in the assets test for the Age Pension?”

    We have no problems with any changes to the age pension as we have a small super fund and a modest family home. Reading the article carefully, I note that the Assistant Minister hasn’t flagged the family home as an asset. Her words: “A good retirement outcome is not driven solely by one’s super balance,” she said this week. “It’s about the other pillars as well: [the] Age Pension and voluntary savings outside of super, including the home.”

    Chris Richardson, a person not involved in government decisions, has constantly stated that the family home should be included as an asset. His thoughts can in no way be construed as having any bearing on the family home being included as an asset. To be practical, it is almost impossible for any government to devise a fair assessment of a family home because of the differences state to state, suburb to suburb, city to country or large town to smaller towns.

  8. 0

    What a ridiculous article. Nothing but scaremongering. Why not wait for the report then comment. Production of a report will be a long way from any legislation being passed. Why create angst just for the purpose of a headline?

  9. 0

    They are going to save 6billion!
    Of course they’ll do it and give themselves another nice big pay rise and the rest to the squares who’ve done nothing to build the countries wealth.
    All I can see is many through no fault of their own having to sell their family homes be dumped in by all admissions, sub standard old age care just to shut the speakers up.
    Just another round of mindless paperwork to validate why they’ve given another u teen bloodsuckers jobs paid for by the actual taxpayer. What a ridbloody greedy circus.
    A house does not make a person an 8ncome and why should they have to sell a family home because ‘time itself’ has made the Land that the once Modest house sits on.
    There would be very few who will be able to remain I. Their home if this is enacted.
    The idiots can’t see they then become an even bigger drain on the tax dollar.
    If they sell all the money goes into buying into aged care. It is not free except to those that have spent all their money. Otherwise you sell your house and the aged care providers just say I’ll have that thanks.

  10. 0

    I believe that the family home should be in the assets test but a fair value set, so as to not affect the ‘workers’ of Australia. But those living in houses worth $millions, are far from struggling.
    To have to sell a ‘mansion’ is hardly an unfair expectation. All you need is a comfortable home, with accepted living standards. Living in a house overlooking Sydney Harbour and collecting the pension does not fit in my view. These are hard and difficult times now, everyone has to do their bit.

    • 0

      Nobody can afford the crazy prices being demanded for those harbourside houses. They were affordable for the ordinary worker in times past.

      A property correction can’t come soon enough.

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