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2 April 2025
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Please check our article on the merits of including the value of the principal place of residence in the pensions asset test, subject to a high threshold to ensure it only captures the 'wealthy'.
Then add your opinion in the survey.
This week, the OECD Survey on Australia said:
“Age pension payments have risen more markedly than other social benefits, such as those for the unemployed. In addition, the prolonged boom in house prices have inflated the wealth of many pensioners without impacting their pension eligibility given that the value of the family home above a modest threshold (AUD210,500) remains outside the means test. Half of the government’s spending on the age pension goes to people with assets more than AUD500,000. Indeed, the recent Retirement Income review highlighted that the distribution of age pension expenditures is much less skewed to lower wealth quintiles than other payment.”
There are only two questions, it will take only a couple of minutes.
The reverse mortgage makes sense. In your younger years you work and pay down the mortgage. In your retirement years you live off the tax free capital gain that your house has accrued. However there would need to be some sort of statutory not for profit body set up to offer the reverse mortgage. No one should make a profit out of it in my opinion. Regarding the threshold one option would be to base it on a calculation of life expectancy and an estimated annual cost to live comfortably plus an additional buffer to cover the unknown unknowns.
Regarding ""there would need to be some sort of statutory body set up to offer the reverse mortgage"" There already is and its called Centrelink. Refer their Pension loan Scheme !
And it offers something few people wants - isn't it typical?
Think your right GLeung. Also I believe the commercially available reverse mortgages are even worse than the centrelink option !!
Gotta confess I'm lost here. As Andrew says, a house is a house. It generally produces no income whether its worth $250,000 or $2.5MM. I live in a regional area so multi million dollar homes are not a problem (!) but I can see if someone has lived in a capital city area with high growth for a number of years they can have a valuable asset but little income, particularly if most spare cash has gone towards the mortgage rather than building up the super kitty. Farmers have had the same problem in the past - asset rich bit income poor. So lets suppose we limit pensions to those with houses worth less than say $1MM just for example. If someone has a house worth $1.1MM and $0.5MM in super what do they do? Sell their house? Hardly rich bastards worthy of shoddy treatment. The only thing I can think of would be to recover the difference via some form of death duty/inheritance tax based on the capital gains accrued in the estate; that is after the owners no longer need the house. Not going to win many elections with that option though. And a fertile ground for numerous loopholes no doubt.
Why are the young paying taxes to fund pensions for people who own houses the young could never afford, and then that same house gets handed down as an inheritance to the wealthy owners children. They say Australia rewards hard work, if that was so why do you get taxed more the more you earn, while houses go up tax free faster than the young can earn, only to benefit the owner and their dependents
Bill. Those houses have been bought by people who in younger years paid tax. So if they have earned it they should be able to or family benefit from those earnings years let. You get what you work and save for one way or another. Maybe they have gone up in value but who's fault is that, theirs. No, they are just benefiting from it. Good luck to them. Envy is not a nice word.
Nothing to do with ""Envy"". All to do with fairness and we should be taxing unearned income and reduce taxing earned income.
A working person on a modest income who bought a modest house in the eastern suburbs of Sydney in the 1980s would have paid about $150,000 (and paid 15% or more interest). I know because I bought a unit in clovelly in 1986 for $ 74000, so this is not hypothetical. That purchase alone means I will never be eligible for the aged pension, a fact I am infinitely grateful for. Now that they are elderly and retired their house might be worth about $3million but their means are still those of a working class family who just happened to buy in an area that has appreciated markedly. Their home is a home. It is not an investment or a tax rort, it is a home. The proposition is that they should be forced to sell at a time in their life where stability is critical to their quality of life, be disconnected from their community when they most need that connection and leave their home of many decades incurring substantial cost in stamp duty, conveyancing, removal costs, agent fees etc and all the attendant stress. The alternative, eat into their capital through reverse mortgages is a source of insecurity and stress. The pension is a pittance and there are far more people exploiting the disability pension and a myriad of other social welfare payments than pensioners. No matter what a persons house is worth it is beyond me how anyone lives on the current aged pension. Even a beer at the pub or club would be a rare luxury. A little more thought, compassion, proportionality, nuance and balance is needed in this discussion.
Andrew, So very well put.
Agreed !!! There is always someone , or some organization, thinking up ways and means to defraud , yes, defraud, rightful owners of their own homes after a lifetime of honest labour and self sacrifice to achieve home ownership. An example; the current W. A. government is finalizing legislation to "Kick a Granny Out of Her Flat". Take care, Ramon .
Agree. Too many exploit the welfare system which "wealthy" pensioners who own their home having paid it off over forty years are now looked upon as the means to fund ever increasing social welfare. Take a look at disability pensions, open to the most appalling exploitation by so called family.
Graham you know that I have agreed with this policy change for many years. House prices have opened up real inequity in this country and those with means need to pay for their retirement so there is more to fund those that really need it. Regards
Make the limit $700,000 or 20 % above the medium value for the local area, and give a two year phasing in period. Also make such events that would lead to downsizing, exempt from State Stamp Duty. The States would still gain revenue from the duty imposed on the higher priced property anyway.
Yes, I think the limit has to be connected to local area values
"...given that the value of the family home above a modest threshold (AUD210,500) remains outside the means test. " What is this $210,500 threshold? I thought the entire family home is exempt from the asset test. I like the idea of an universal pension which would allow those in need some dignity and reward those who have worked hard to achieve an independent retirement. With the current system, I believe there should be a ceiling above which the age pension should be gradually reduced. Setting the ceiling is going to be complicated because house prices vary through out the country. I would suggest something like a multiple of median house price in a particular capital city say 30 years ago. For example, for Sydney, the ceiling would be approx. $2.5m, being 30 times of the price in 1981 ($78900). For Brisbane the ceiling would be approx. $1.5m.
Hi C, yes, the entire family home is exempt, but what the OECD is referring to is mentioned in the article. The pension threshold amounts are about $216,000 (now) higher for non-homeowners.
Pensions are for those in need. Millionaires with house of grandeur who have manipulated their status to receive a pension should be called out. The LNP government is complacent and fear to attack their voting base by cutting out these rorts.
It does seem unfair that the pension is rewarded to those who are lucky enough to still own a home in old age. Divorce, illness, bankrupcy can lead to losing your home owner status later in life. Maybe you have lived frugally and aggressively saved into super to compensate for the loss but the government only allows you an extra $200K in super before you start losing the pension. With average rents for little units close to $25K a year this only gives you about 8 years of renting. Clearly non home owners should be allowed to have more assets in the assets test when calculating pension eligibility.
Exactly, Iniquitous at present
Within a decade or so, compulsory super balances for new retirees will likely ensure very few get the full aged pension. Compulsory annuities will stop retirees disposing of super to get the aged pension. Problem solved.
Hi John, another guaranteed business like private health insurance, green slip, etc.? Thank you very much.
Pension is needed for those who are not millionaires Pensioners who rent live below poverty line
Hi David, agree subject to some assets or income test. My article is not directed at pensioners who do not own their own home and rent.
It's strange to me we worked went without to scrimp to buy a house paid rates insurance painted it paid upkeep and now prices have gone up so if we sell to as they say down size the prices even to down size have gone through the roof or retirement villages with their strings and are owned by big corporations where we loose our interdependence. They hound us but large corporations can get gov handouts e.g. job keeper for millions but jealous people want our house we didn't get child care subsidies etc paid high interest rates etc worked hard and we are the bad guys
The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?
The RBA Governor says rising house prices are due to "the design of our taxation and social security systems". The OECD says "the prolonged boom in house prices has inflated the wealth of many pensioners without impacting their pension eligibility." What's your view?
Improving housing mobility in Australia is crucial for enhancing both individual well-being and the economy. Potential reforms include ensuring greater rental security and incentivising downsizing among older homeowners.
This time last year, I highlighted 16 ASX stocks that investors could own indefinitely. One year on, I look at whether there should be any changes to the list of stocks as well as which companies are worth buying now.
The ABS recently released figures which are used to determine key superannuation rates and thresholds that will apply from 1 July 2025. This outlines the rates and thresholds that are changing and those that aren’t.
With the arrival of the new year, the first members of ‘Generation X’ turned 60, marking the start of the MTV generation’s collective journey towards retirement. Are Gen Xers and our retirement system ready for the transition?
The intergenerational wealth transfer, largely driven by a housing boom, exacerbates economic inequality, stifles productivity, and impedes social mobility. Solutions lie in addressing the housing problem, not taxing wealth.
Warren Buffett's annual shareholder letter has been fixture for avid investors for decades. In his latest letter, Buffett is reticent on many key topics, but his actions rather than words are sending clear signals to investors.
With an election due by 17 May, we are effectively in campaign mode with the Government announcing numerous spending promises since January and the Coalition often matching them. Here's what the election means for investors.
Larry Fink is one of the smartest people in the finance industry. In his latest shareholder letter, the Blackrock CEO outlines his quest to become the biggest player in private assets and upend investor portfolios.
Our economy grew by a nominal rate of 7% per annum from 2017 to 2024, but it benefited from the largesse of fiscal and monetary policies, both of which are now fading. We need a new, credible economic growth agenda.
If the recent polls are anything to go by, we are headed for a hung parliament at the upcoming federal election. So more than ever, Australians need to give serious consideration to their preference votes.
It’s common for people as they age to seek more help in running their SMSF if their capacity declines. An alternate director may be a great solution for someone just planning for short-term help in the meantime.
In this interview, Matthew Haupt from Wilson Asset Management discusses his outloook for the ASX, sectors such as REITs that he likes, and his firm's launch of a new income-oriented listed investment company.
Life expectancy isn't just a number - it's a concept that changes with survival rates over time. This article breaks down how age, survival, and societal factors shape our understanding of life expectancy, especially post-Covid.
Gold mining stocks outperformed in 2024 and are expected to do well in 2025. At this point in the rally, it's worth considering what has driven gold prices higher and why miners could still have some catching up to do.