Heat on ‘wealthy’ pensioners

As YourLifeChoices prepares a survey and submission for the federal government’s retirement income review, debate about including the family home in the assets test for the Age Pension continues to swirl.

An Australian National University (ANU) analysis has calculated that about $6.3 billion a year in Age Pension payments go to more than 255,000 pensioners who own homes valued at more than $1 million.

It also found that nearly 30,000 pensioners own homes worth more than $2 million.

However, there is widespread resistance to including the family home in the assets test, with the majority of YourLifeChoices members clearly opposed to the concept. And Treasurer Josh Frydenberg has stated the family home would not be included in the assets test for the Age Pension. Yet concerns continue to build.

The Combined Pensioners and Superannuants Association (CPSA) says the government should review its generous tax concessions for retirees with big super balances – estimated at more than $36 billion a year – rather than eye the family home.

CPSA policy manager Paul Versteege says the family home should not be included in the assets test because “the vast majority of people live in modest houses”.

He told The Australian that including the home in the assets test was a red herring, as homeowners were generally unable to liquidate more than 25 per cent of the equity they had in their house. He added that greater government savings were possible by examining tax concessions for wealthy Australians.


“Our position is that the cost of the Age Pension is not onerous to the government at the moment,” Mr Versteege said. “There are other areas in the tax and transfer system where efficiencies can be made.

“The government could address family trusts, for example, or look at tax concessions in the superannuation system. Putting $1.6 million in superannuation tax-free is quite a lot of money.

“There are quite a lot of areas where wealthier Australian are still being subsidised.”

Michael Rice, chief executive of actuarial firm Rice Warner and Australia’s top retirement income expert, urges that the government should review the assets test thresholds for homeowners to encourage retirees to unlock the equity in their homes.

He says the political fallout from such a move could be cushioned by increasing the assets test threshold to $1.6 million for homeowners and non-homeowners.

“A married couple of 67 living a normal life expectancy receive a benefit on the Age Pension of $800,000,” Mr Rice said. “If you have someone who’s living in a $3 million home, and you give them $800,000, is that a good use of taxpayer money?”

Most of those people live in up-market pockets of Sydney and Melbourne, and likely bought their home decades ago, well before the real estate markets of our two largest capital cities took off.

ANU associate professor Ben Phillips says the proportion of pensioners living in “pricey” homes has become increasingly noticeable, especially in Melbourne and Sydney.

“The median Sydney house price is around $1 million,” he said. “Pensioners who bought in well-located areas many decades ago now find themselves in houses worth a million or more.”

Mr Phillips told news.com.au that there was the potential to “tap” that wealth, through such products as reverse mortgages and the Pension Loans Scheme (PLS).

Former senator for the Liberal Democrats David Leyonhjelm said the ANU analysis was an “excellent expose of middle class welfare”.

“Pensions should be exclusively for those who cannot pay for themselves, not to underwrite inheritance,” he wrote.

Former executive director of The Australia Institute, Richard Denniss, says there is nothing equitable about our retirement income system.

“Single, older women who don’t own their own house are among the poorest people in Australia,” he said, “while we give billions of dollars to those living in multimillion-dollar homes – not just via the Age Pension, but also through superannuation tax concessions and, of course, franking credit refunds.

“There’s clearly no appetite to make our retirement income system fairer, but there does seem an appetite to make it less generous for the poorest people in the country.

“A fair system would look at all sources of wealth and income and all sources of government support, and provide the most support to the people in greatest need.

“Unfortunately in Australia we provide far more support to some of the wealthiest retirees than we’ve ever given the poorest.”

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Written by Janelle Ward


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