Experts have thrown their support behind retirees and claimed the government should take a slow approach to including primary dwellings in the Age Pension assets test.
Adding their two cents to what has been a long-running debate over the test, the Australian Housing and Urban Research Institute (AHURI) has made it clear in its new report that if any changes are made immediately it could affect retirees finances dramatically – and not in a good way.
Centrelink’s assets test currently omits the value of an applicant’s primary dwelling when assessing their wealth in order to determine what level of pension they can receive. And while other experts have been all for the addition of the home in the test, in a new report AHURI researchers have disagreed.
The researchers said a change in the ‘rules of the game’ after Aussies have retired is “unfair” and that speeding up the process won’t prove beneficial.
“Choices around housing are critical from a lifestyle perspective and changes to policy should be introduced progressively to ensure that the parameters that shape life-cycle decisions can be adequately incorporated into long-term planning horizons,” the report said.
This is a stark contrast to the views of experts who just months ago called on the government to include the family home in the assets test. In the Options for an Improved and Integrated System of Retirement paper, actuarial experts David Knox, Anthony Asher and Michael Rice labelled the current retirement system “complex, intrusive and unfair” and said a reform is needed in order to make it more sustainable as Australia’s ageing population grows.
The authors believe the exemption of a person’s primary dwelling is unfair as it can allow homeowners whose properties are worth extortionate amounts to claim the full Age Pension entitlement if they have minimal savings and assets.
However, AHURI researchers said no decisions should be made to alter the assets test, without first examining the financial position of older Australians who have become accustomed to the current rules.
“Such changes must acknowledge that existing wealth portfolios of older Australians have been shaped by a set of rules and policy settings that they have experienced over their working lives,” the report stated.
The report comes amid a Treasury review that will examine the three pillars of retirement income: the pension, compulsory superannuation and voluntary savings. The review, which is the first of its kind in three decades, was initially recommended by the Productivity Commission after a damning analysis of the country’s poorly performing super funds earlier this year.
It will be chaired by former senior Treasury official Mike Callaghan, alongside chair of the Self-Managed Super Fund Association Deborah Ralston and Future Fund board member Carolyn Kay. It will be the first inquiry into the compulsory superannuation scheme since the 1993 inquiry, led by Vince Fitzgerald, which was carried out a year after former PM Paul Keating’s compulsory savings system was introduced in 1992.