Means-testing the family home could result in a $6000 increase to pensions.
A report released on Monday by the Centre for Independent Studies may encourage the Federal Government to push forward with plans to include the family home in the pension assets test.
The calculations in the report suggest that asset-testing the family home and encouraging retirees to borrow against that home in order to get a pension, could result in $14.5 billion slashed from the pension bill and a $6000 increase to the pension. These changes would also see non-home owners with assets no longer receiving a lower pension than home owners with assets tied up in their house.
The Centre for Independent Studies is a think tank that is pro free-enterprise and, one of the report’s authors, Matthew Taylor, believes that these changes to the pension assets test “could be popular if it's explained carefully”. He also says that “It would need a cultural change, and the government would have to build a case, but it would make the pension sustainable.”
In an attempt to have retirees fund their own pensions, the plan would see the government creates stricter rules surrounding reverse mortgages. Retirees would be encouraged to borrow up to 80 per cent of the value of their home, which would be accessed as regular pension payments. This mortgage would have set fees, but most importantly, come with a government guarantee that the home owner would not be forced out of their home.
These significant changes would see 70 per cent of those receiving the full Age Pension moved onto the part Age Pension and 24 per cent of singles and 32 per cent of couples moved off the part Age Pension.
These changes would allow increases in the full Age Pension rates to match the Association of Superannuation Funds of Australia’s (ASFA) yearly budget standards for living a modest lifestyle of $23,469 per year for singles and $33,766 for couples.
Read more at www.theage.com.au
With another Federal Budget blowout expected next month, it comes as no surprise that the Government is looking to make cuts wherever possible. It’s difficult to argue with the logic behind the report released by The Centre for Independent Studies into means-testing the family home. But is it fair?
I certainly agree with many points in the report, especially the part where it hopes to even the playing field. Under the current system, a home-owner with the same number of assets tied up in their house as a non-home owner with assets, may receive a higher pension.
The question you really need to ask yourself when deciding on this matter, is whether the pension is simply a safety net to fund those without the necessary assets and resources, or is it an entitlement every Australian deserves for paying taxes all their life and contributing to what the country is today?