The excess value of family homes above a threshold of about $500,000 to $833,000 would be included in the pension assets test under proposals aimed at distributing benefits of government retirement spending more equitably, the Australian Financial Review reports.
Retirees would be encouraged to work part time while their health permitted and trade in their family homes for smaller ones under the recommendations in a report prepared by veteran superannuation consultant Michael Rice.
The report, to be presented to the Actuaries Institute’s Financial Services Forum on Monday, finds that the superannuation system is succeeding in at least one of its goals, with the cost of government age and veterans’ pensions expected to fall from 2.7 per cent of gross domestic product at present to 2.5 per cent in 2038.
That compares with a projection in the 2015 Intergenerational Report that pension spending would stabilise at about 3 per cent of GDP and the 2002 Intergenerational report’s shock projection that the cost of pensions would blow out to 4.6 per cent of GDP by 2042.
Growing superannuation balances, good returns and older people putting off their retirements for a few more years or working part time in retirement have contributed to the turnaround.
Mr Rice, chief executive of Rice Warner, said the savings should be ploughed back into aged care and other spending on the aged to deliver a dignified and comfortable retirement for all.
His recommendations for including the family home in the pension assets and encouraging retirees to downsize into smaller homes or borrow against their homes to increase their incomes echo suggestions by Productivity Commission deputy chairman Karen Chesters in 2015.
Mr Rice’s report, The Age Pension in the 21st Century, says the pension system has no agreed goals and its interaction with the super system favours wealthy, home-owning retirees at the expense of middle-income retirees and renters.
Means test the family home for fairer retirement system: expert (Australian Financial Review)
The Age Pension in the 21st Century (Rice Warner)
Actuaries Institute’s Financial Services Forum