The ACCI recommends that the family home be included in pension assets test.
Senior welfare groups are up in arms over the ACCI’s recommendation that the family home be included in the Age Pension assets tests.
The Australian Chamber of Commerce and Industry (ACCI) has released its pre-budget submission, which urges the Federal Government to consider adding the family home or principal residence to the assets test for Age Pensions.
The group has recommended that should the primary residence be valued over $450,000, those retiring at 65 would not be eligible for a full or part Age Pension for five years.
It also recommends that retirees with assets above this threshold should be offered interest-free loans against the value of their home or other assets.
The pension loans would, in effect, act as a reverse mortgage and be repayable upon death, the sale of the house, or upon admission to an aged care facility.
"This provides retirees with choice so that they can remain in their primary residence, leave a bequest and afford their retirement," says the submission.
The report states that four in five retirees will be reliant upon a full or part Age Pension. It also states that a similar number own their home. The total value of these homes is believed to be around $1 trillion.
The ACCI also recommended that, by 2035, the retirement age should be gradually lifted to age 70.
The recommendation to include the family home in the assets test has drawn the ire of older Australians and peak senior welfare groups.
"We're not quite sure why basically the most vulnerable Australians should be responsible for budget repair," said Combined Pensioners and Superannuants Association’s Paul Versteege.
"There are many other things that could be used to fix the budget.”
At this stage, though, the Government would be unlikely to include the principal residence in the assets test.
"That would be very much against the principles of the Coalition government," said Revenue and Financial Services Minister Kelly O'Dwyer.
"Never before have we included the family home [in the assets test] and I don't see why that would change."
Read the ACCI pre-budget submission
Targeting retirees as a quick fix for the economy seems to be all the rage at the moment, but lobby groups and institutes need to look elsewhere for their economic ‘remedies’.
The total value of housing owned by older Australians may be $1 trillion dollars. Reports such as the ACCI submission seem only to focus on a dollar amount. Do they forget that our population is ageing? So, of course, the number of houses owned by older Australians will continue to increase and add more dollars to that figure.
The ACCI thinks that four out of five retirees own their home. Our own survey of 6677 real retirees suggests that it is less. Just over 69 per cent own their home fully, with a further 17 per cent still paying off a mortgage and 13 per cent renting.
As far as retirees being reliant on an Age Pension, well, our research shows that around seven in 10 will rely on a full or part Age Pension. And this percentage is in line with what is quoted in the Treasury’s 2015 Intergenerational Report, which is 67 to 70 per cent – not 80 per cent. If the ACCI wishes to make recommendations, it needs to look at the core statistics more accurately.
Even if these people own their home, why are they being targeted as a fix for the economy? Why look at this particular demographic, of which 70 per cent will rely on Government assistance at some stage of their retirement, to fix the budget?
And is it fair that people who have worked hard all their lives in order to own their home, because they were told that they’ll have a tough time of it in retirement if they didn't, could then be penalised for doing exactly that: working hard and saving?
The real kicker is the inclusion of all houses over $450,000. At today’s housing costs, that would include pretty much every house on the market. Where can you buy a house for less than $450,000? If the family home has to be included in the assets test, then at least take aim at people with more value in their home, say, $2–3 million?
In all fairness to the Government, its response that it would be unlikely to include the family home in the assets test is one that all retirees will welcome. But this is a Government that has reneged on promises before, and if business lobby groups, such as the ACCI, and research institutes, such as the Grattan Institute, keep suggesting that retirees are fair game, then eventually, the Government will be worn down. Hopefully, though, that day is far away.
Do you think the ACCI recommendations are fair? Should the family home be included in the assets test? If so, what would be a suitable threshold? If not, what means can you recommend for injecting some life into our economy?