The newly formed Committee for Sustainable Retirement Incomes (CSRI) believes it is time to revisit the exemption status of the family home in the retirement income system. Consisting of public policy experts, the committee has challenged in a paper prepared for the National Reform Summit next Wednesday, the current rulings surrounding the family home.
The paper discusses how the case for full exemption is becoming weaker as home and other assets increase in value. It also addresses how that effect on income and consumption could be made up by allowing the Age Pension to continue to be paid and then recovered from the estate.
The paper argues that there is a pressing need for reform and that while there is a risk that because people are living longer, their resources could be exhausted before they die, the current trend is that retirees are living too frugally and are leaving accumulated superannuation pools to their estate.
CSRI executive director Patricia Pascuzzo believes that the first step to improving confidence in the retirement income system is greater agreement on the reform agenda.
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The biggest change in many years to the Age Pension system was delivered in the Federal Government budget just four months ago, but that hasn’t stopped the CSRI from suggesting further changes that could affect thousands of pensioners.
The May 2015 changes to Age Pension asset thresholds which will take effect in 2017 will see thousands of pensioners completely lose their pensions, while more than 170,000 are expected to receive an increase.
The newly implemented asset threshold changes are already harsh enough on individuals and couples who own a home, with individuals being allowed assets of just $547,000 before becoming ineligible for a pension. This may seem a lot, but the latest projections show that, for a 65-year-old who is expected to live another 25-30 years, it isn’t anywhere near enough money for a comfortable retirement.
The family home is the one core asset most people work their entire life to own. No matter where it’s located and no matter how much it’s worth, the family home should remain exempt.
What do you think? Is it time to review the exemption status of the family home? Or is the family home the one asset that should always be off-limits?