Approximately 350,000 people in Australia have asset values of more than a million dollars and are claiming the aged pension due to the assets test that leaves the family home out of the pension calculation. And it is costing the country billions said a report from the national centre of social and economic modelling yesterday. It is money well spent, many here might say. But there are plenty of people prepared to say that this is just a “Government-funded inheritance subsidy scheme for the next generation” and it needs to change.
The issue is political dynamite, but seems like one that has to explode sooner or later. As 77 per cent of the over 65s, Australia’s pensioners are a powerful group, perhaps one of the most powerful in Australia, as the Abbott Government found out when they proposed changes to both the pension age and the health schemes affecting pensioners last year.
The aged pension costs Australia $42 billion per year and it is being said that the government could save more than $5 billion through changes to the way the wealthy family home is considered. Seniors groups COTA and National Seniors are both asking the government not to make a knee jerk reaction, but to consider a wide ranging review of pension and seniors related issues, looking at it holistically to understand how all of the issues affect those retired or approaching retirement. But today we want to hear what you think. Do you think the government should implement a test that excludes the asset rich, cash poor from the pension?
It is clear the government and the opposition are listening with the social services minister Scott Morrison moving to allay political fears this morning on talkback radio, categorically ruling out putting the family home in the assets test for the pension. But it is about to become a lot more heavily discussed.
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The parliament will table the five-yearly intergenerational report after some delays in the next few weeks, which is destined to bring this subject to the fore and raise widespread debate about how the pension can be adjusted without losing the voters the Abbott Government so desperately need.
There is some talk that the Government might move to change the assets test one day, but only as a long ranging policy that would likely not affect this generation of pensioner. In a speech to the Centre for Independent Studies, Kelly O’Dwyer, Parliamentary secretary to the Treasurer was confident about what needs to happen.
“Leaving aside for the moment whether it’s the right thing to change the assets test, one of the key questions that advocates of change will need to address is how to be fair to those who decided to overcapitalise in their house over a number of years, possibly decades, precisely because of that exemption for the family home,” she said.
“The challenge for government is that it needs to take into account all of these different perspectives and will necessarily need to make compromises between them”.
According to the Financial Review, the last intergenerational report, released in 2010, estimated that by 2049-50, age-related pension payments would increase from 2.7 per cent of GDP to 3.9 per cent, This amounts to over $60 billion a year in today’s dollars.
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The Grattan Institute reports from 2013 say that including some of the value of the home in the assets test would raise as much as $5 billion a year in revenues.
It also estimated that in 2011, among pensioner-age households with a million in net assets, about 80 per cent received welfare benefits. On average they received more than $200 a week.
The Audit Commission report presented to the Federal Government suggested that the pension asset and income tests should be combined and that there should be a valuation trigger applied to the value of a home of over $500k for singles and $750k for couples.
It is worth noting that 77% of Australians over the age of 65 receive income support. It is no wonder the Government sees the concern in changing such policy.
And whilst the Government searches for income, the people who rely on the income support system for a basic acceptable standard of living say that they are finding it harder to make ends meet.
Share your thoughts today… Should the Government be implementing an assets test on pensions?