Use your equity or suffer: Are pensioners being given an ultimatum?

If you have money in your home, you could face the prospect of lose your pension, according to the head
News

If you have money in your home, you could face the prospect of lose your pension, according to the head of the Productivity Commission.

Chairman Peter Harris says Australia is ill-prepared for an influx of relatively healthy retirees who will live longer.

“The original age pension recipients generally had spent near enough to 75 per cent of their life after the age of 15 in full-time work,” he will say, reports Fairfax.

“For the baby boomers, that figure has fallen to about 60 per cent, and for the generation today in high school, that figure will fall to around 50 per cent, mostly based on significant health gains.

“Over the next generation the cost of the age pension would climb by 1 per cent of gross domestic product, the cost of aged care by 1.8 per cent, and the cost of healthcare by 2.9 per cent”.

Many older Australians don’t want to chew into their savings or use the equity of their homes just to get by.

“At the personal level, there’s no reason to be critical of an inherent tendency to save in old age,” Mr Harris will say.

“But poorly-constructed policies should not exacerbate such tendencies. Nor should they pander to populist commentary”.

Australians aged 65-74 had home equity per household of $480,000, Productivity Commission figures show. While the median super balance at age 60 was $95,000, housing was “the very last asset to be drawn upon, if at all”.

Interestingly, a Commission survey found 88 per cent of retirees planned to leave their house to one or more family members.

Mr Harris is today calling for a comprehensive review of the pension system, arguing it is probably the only way to “generate the necessary public understanding that change may be needed”.

One recommendation will be to force retirees to include their house in the assets test for the pension, in turn having no choice but to use the equity. If houses were completely included, a further 11 per cent of retirees would lose the pension and almost half would have their pensions cut.

For example, if the value of assets above the median house price of $440,000 were included, the proportion of Australians qualifying for the pension would slip 2.5 per cent and 8 per cent of pensioners would lose part of their pension.

Tell us, do you think this is fair?

  1. Bea Little

    Well that’s a liberal government for you happy now

    • Bea, I’m sorrry to have to tell you that if Labor was in power, our deficit and weekly interest payments would have soared even farther and they’d still have the problem the LNP has: spending more than income.
      At some stage, whoever is in power would have to fix the broken system.

      • Peter  

        If you look at the actual spending under the Labor Government you would find that it was falling in relation to the GDP, LNP has turned this around dramatically. Your quoting LNP rhetoric!

      • John Brants  

        Proof/evidence required please.

        • Peter  

          Do some leg work yourself, search the internet it’s easy enough to find the figures. Here’s a hint, try the Australian Bureau of Statistics and stop repeating the lies of the LNP!

  2. Rosalind Battles

    what next? I am sick of this, what is it? pick on Boomer decade ?, the Liberals started all of this, they can bugga off

  3. Rosalind Battles

    what next? I am sick of this, what is it? pick on Boomer decade ?, the Liberals started all of this, they can bugga off

  4. Rosalind Battles

    what next? I am sick of this, what is it? pick on Boomer decade ?, the Liberals started all of this, they can bugga off

  5. Britty Babs

    Absolutely right. Why should they be able to sit on a small fortune just to pass on to their children when they die. They should have to live off their money, just like the rest of us.

    • Libbi Elliot

      It is a bit different from having money in the bank already, and having to sell your home, the place you live in, if you can’t get the pension it because you already have money or are not old enough

    • Britty Babs

      Its no different at all. It’s money, whichever way you look at it. They want to live on a Government handout while saving that house [money] to leave to their kids.

      • Doinittough  

        Clearly those who are for this do not already own a home! If you had worked 3 jobs for a deposit then worked your arse off while also bringing up kids on your own to give them stability you would have a different view. Some of us don’t have superannuation eithet

        • Neil  

          I own my home (subject to a smallish mortgage) and we have buggerall super. I think that this plan is fair, because being thirty something, I am sick of Gen X and Gen Y being screwed over by asset rich pensioners, who have levels of wealth that my generation can only dream of whilst we pay pensions through our tax dollars to fund a generation who had the easiest of conditions to build wealth – free education under Whitlam (and Commonwealth Scholarships before that), cheap property prices and now, it would appear, the ability to negatively gear. Young Workers are happy to fund a safety net, but not a feather bed.

          • Rhonda  

            Neil, I beg your pardon, but we paid 18% mortgage rates on very low wages, had no child support, no welfare, no first home buyers, paid for the education of our children, no child care support, if we had a 2nd job, which a lot of us did, to get our humble homes, we were taxed enormously high for that privilege. We had very little superannuation, which in the last 7 years is going down a slippery slide on roller skates, so our super will be worthless, and if we have to sell our homes, who will pay for our aged care??? We have more than paid our dues Neil – so get off your high horse and give seniors a fair go – god knows they have worked hard to get where they are and are now getting senior bashed by all and sundry!! Your turn is yet to come!!

          • Neil  

            Rhonda- sure everyone has a story about how much they have struggled. And with respect to your generation, so serious commentator would argue that Gen X and Y have had it easier than the Boomer Generation – especially in terms of property prices. 18% mortgages is very misleading, and something that Boomers will often cite. Firstly, according to this graphic, interest rates were only above 15% for a short period between 1988 and 1990 http://www.loansense.com.au/historical-rates.html – very few people would have been excited enough about the interest rates at that point to fix long term. Secondly, high interest rates, when good properties were purchased for $30,000, forty years ago does not compare to the low interest rate payable on $1,000,000 mortgages, which is quite common nowadays. Even if you take into account a very welfare ridden year, it doesn’t compare to the aged pension – to put it into context, the first home owners grant in VIC is $10,000, Child Care rebate is capped at $7,500 per year, – so the pensioner welfare per couple far exceeds this. Further you cite low wages – and the average wage 40 years ago was $7,618. Now the average wage is 10 times higher. HOWEVER THE AVERAGE PROPERTY PRICE IS 30 TIMES HIGHER http://www.news.com.au/finance/money/costs/40-years-of-change-what-were-paying-way-more-for/news-story/3a9cc7dbc1ec5394c3dbe8ba9365b064. So basically our generation is screwed compared to yours. No pensioner could possibly have paid enough in tax to cover their pension, so it is a gift from taxpayers, that should go only to the most needy. Seniors who are rich and have expensive homes should get of their high horse, be thankful that their house have gone up exponentially in value, stop being selfish and do the right thing for the country and young people by ensuring that are not consigning the young to a bleak future paying for the interest bill required to pay pensions and the pensions themselves for decades to come. My time may come, bring it on – our generation have pretty much been told that there will be no pension come our retirement – another area where our generation is screwed.

      • The pension is not a Government handout it is an entitlement we have earned by paying tax for over 50 years! If we have a little extra as well it means we were thrifty over the years and didn’t spend to indulge ourselves. We managed to pay off our homes, very modest most of them but appreciated in value over the years. We did this as well as raising and educating children. We went without overseas holidays, the latest electronic gadgets and flash cars and furniture. We might be comfortable now, but when our spouse dies we will be in trouble as the assets test for couples is different to singles and we are not allowed to give it away. The pension decreases but the bills stay the same. Good luck when you reach that age!!

    • David James

      you are to wealthy to get a pension, so you want everyone else to suffer, and what happens when these people have to go into aged care? the sale of their houses funds that

    • Britty Babs

      I don’t have two ha’pennies to rub together…. you don’t know me David, and name calling never solved a thing.

    • Sue Walshaw

      Because most of us AREN’T sitting on a small fortune, some of us still have mortgages and this will open up a whole new scheme for banks to rip us off even more.

    • Kerry Sandford

      At least Britty Babs is dealing with reality. You dont need to sell your home to have access to the equity in the home. The productivity commission has clearly identified that the current pension scheme is unsustainable and something needs to happen before all pensioners lose their benefits. A maximum of 4 to 500 thousand allowance for pension assessment sounds like a fair and equitable starting point

    • Leanna Stephenson

      if you are so poor Britty why do you have to live off your own money? people over pension age get a pension in this country, unless they are rich

    • Vivienne Marjenberg

      Britty the majority of pensioners do not have anything but their home and the pension, most of us worked ALL our lives for our homes, why should they be taken from us I’ll bet the politicians won’t have to sell their homes and they will still collect their bloody pension and not made to suffer, different rules for different people

    • David Childs

      Britty Babs It is not the pensioners fault that you do not have two ha’pennies to rub together. It is also not our fault that the house is not counted as an assett. If you are or were a pensioner you would accept the same situation.

  6. Britty Babs

    Absolutely right. Why should they be able to sit on a small fortune just to pass on to their children when they die. They should have to live off their money, just like the rest of us.

    • Libbi Elliot

      It is a bit different from having money in the bank already, and having to sell your home, the place you live in, if you can’t get the pension it because you already have money or are not old enough

    • Britty Babs

      Its no different at all. It’s money, whichever way you look at it. They want to live on a Government handout while saving that house [money] to leave to their kids.

    • David James

      you are to wealthy to get a pension, so you want everyone else to suffer, and what happens when these people have to go into aged care? the sale of their houses funds that

    • Britty Babs

      I don’t have two ha’pennies to rub together…. you don’t know me David, and name calling never solved a thing.

    • Sue Walshaw

      Because most of us AREN’T sitting on a small fortune, some of us still have mortgages and this will open up a whole new scheme for banks to rip us off even more.

    • Kerry Sandford

      At least Britty Babs is dealing with reality. You dont need to sell your home to have access to the equity in the home. The productivity commission has clearly identified that the current pension scheme is unsustainable and something needs to happen before all pensioners lose their benefits. A maximum of 4 to 500 thousand allowance for pension assessment sounds like a fair and equitable starting point

    • Leanna Stephenson

      if you are so poor Britty why do you have to live off your own money? people over pension age get a pension in this country, unless they are rich

    • Vivienne Marjenberg

      Britty the majority of pensioners do not have anything but their home and the pension, most of us worked ALL our lives for our homes, why should they be taken from us I’ll bet the politicians won’t have to sell their homes and they will still collect their bloody pension and not made to suffer, different rules for different people

    • David Childs

      Britty Babs It is not the pensioners fault that you do not have two ha’pennies to rub together. It is also not our fault that the house is not counted as an assett. If you are or were a pensioner you would accept the same situation.

    • David James

      Britty has gone very quiet 🙂 unless you have walked in our shoes Britty you should not be judging, we went without to buy our homes, we did not want all the luxuries you kids have today and we got no handouts from the Government..we paid for our own kids and our own life style

      • Neil  

        There is no judgement happening. Only a calculated analysis of a situation. The fact is my generation are paying for the older generation pension welfare, when that generation is wealthier than what my generation will be. This is unfair and unsustainable. How can anyone explain how it is fair that someone who has paid tax all their lives, been diligent, saved and accumulated assets in addition to the family house of minimal value be denied a pension, whist a couple who has placed all their wealth in an expensive home be given $34,000 per year? How is it fair that young people, who cannot purchase their dream house of over one million dollars be asked to pay pension welfare to a couple living in a home many times that value? Or how is it fair that poor pensioners who could only ever get casual work and no capacity to save receive the same pension as someone who has saved enough to have a mansion? The attachment to the family home is irrational and expensive and it is inevitable that the home (or some value of the home) will be included in the assets test.

    • Britty Babs

      Gee, you guys have no idea about me and my circumstances….. I’m just sitting here shaking my head at all the ‘woe is me’ going on.

    • Britty Babs

      Oh, and just for the record, I am well into my 7th decade… but thanks for the ‘you kids’ comment… I’ll take it 🙂 LOL

    • Debra Vandermeeden

      Britty Babs I am actually “saving” my house because I really do need somewhere to live. After working (both my husband and myself) for over 35-40 years, bringing up two children, my husband actually having the temerity to serve in war, then dying because of that war, you now want me to sell the only asset I own to fund a retirement that to all intents and purposes I actually paid for in my taxes for all those years. You want me to go live in the streets so that the government can get out of its obligation which was set up many years ago by governments that took money out of our tax for the express purpose of funding our retirement. Get real. This is just another money grabbing rort by government because they do not have the balls to target the top end of town where billions could be recouped. Rich people who have ripped the system off for decades. Overseas businesses who pay so little tax. My children do not need my miserable little abode. They need me and I need my house. By the way if you want to add something intelligent to any conversation it is not a good idea to insult the people you are talking to. You say we do not know you but on the other hand you do not know us either, therefore your insults to our intelligence is becoming rather boring and mundane. If you are on your 7th decade and on a pension, you would have been brought up to respect the fact others have a right to their opinion and you would know that some pensioners are doing it hard.

    • Libbi Elliot

      if you are 70 Britty, the only reason you are not getting a pension is because you have to much money and if that is the case, this won’t worry you because you won’t have to sell your house. but I don’t think you are anywhere near 70

    • Neil  

      Britty Babs – not to worry – I am with you all the way. Taxpayers should not be called to fund an inheritance scheme for asset rich pensioner, who purchased homes for stuff- and now the home values have shot up about 30 – 40 times in price. On this basi alone, such pensioners should be ineligible for the pension. The nation can barely afford it, and young workers who can’t get into the market are being ask to fund people who are much richer than they ever will be. This is a Ponzi scheme and all Ponzi schemes come to an end.

  7. Robert Hind

    What does this median price of a home really mean? In an inner city location $440,000 would not even by you a one bedroom unit while in a small country town it would buy you a mansion.

    • Alison Richmond

      I agree with your comment, except $440,000 wouldn’t buy a mansion in a small country town these days 🙁

    • Debbie Bryant

      Alison Richmond It would in our town Alison. Real Estate market is bad for selling and has been for some years. $440,000 would get you a nice 4 bedroom, 2 bathroom home.

  8. Robert Hind

    What does this median price of a home really mean? In an inner city location $440,000 would not even by you a one bedroom unit while in a small country town it would buy you a mansion.

    • Alison Richmond

      I agree with your comment, except $440,000 wouldn’t buy a mansion in a small country town these days 🙁

    • Debbie Bryant

      Alison Richmond It would in our town Alison. Real Estate market is bad for selling and has been for some years. $440,000 would get you a nice 4 bedroom, 2 bathroom home.

  9. Craig Maclean

    Agree completely with Britty. It is not a question of standard of living but whether people have the right to take a taxpayer subsidy so they can leave an inheritance.

  10. Craig Maclean

    Agree completely with Britty. It is not a question of standard of living but whether people have the right to take a taxpayer subsidy so they can leave an inheritance.

    • David James

      you said yourself Britty, They should have to live off their money, just like the rest of us.!! if you are over pension age and living off your own money, then you have to much money to qualify

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