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Three good comments from the pension asset test article

Comments on including part of the value of a family home in the assets pension test, as discussed here.

I've got relatives and the biggest difference in their stories isn't gender, or even the recession we had to have. Its geography, and differing house price increases. All buying similar valued homes around 1970, all working hard, and all suffering setbacks, most working into their 70's. The relatives living in Sydney get a par or full pension, and have home equity of around $2m. Those living in large regional centres get a part or full age pension but have homes worth in the $300k range.

The current system has the children of all these people paying more taxes (or we have less services or build up more debt for generations to come), to fund the age pension for the older generation. Obviously that's fine. The problem is the children of the Sydney relatives have the system protecting their $2m inheritance (say $700k for each of 3 kids), while those with the same story except for where their parents live have a system protecting $100k each inheritance. The goal of the policy proposal is to have the system so it just protects say $1.5m of inheritance per family. So for your situation, if your home is worth $1m, a $1.5m threshold won't affect you. If your home is worth $2m, then $500k would count towards your age pension assets. Once you've borrowed $500k of this to support your retirement you're back to having none of your home value count.

The idea isn't about penalising people for working hard, hurting people with no asset value, and nothing to do with gender. Its about recognising that people with your exact same story except for where they live are treated as little less unequally. If it helps, my parents are in the crowd of people getting a part age pension and living in a $2m house, so I'm benefiting from the current policy, and would lose by any change.

My parents worked until age 72 and 75. I can see the inequity very clearly though with relatives in regional centres. Did I read you withdrew super to help your children buy a house? As a taxpayer I'm against me paying more taxes to pay benefits to people who would have been fine but gave their money away. Effectively I'm paying taxes to give a handout to people buying a house, but only to those with parents who have both the assets and make the choice to give their kids money. Amongst other things, my relatives in regional NSW don't have the assets to be able to do this.

Comment by GG shows complexity of individual circumstances.

In light of all the comments made, please consider the below:
• Female – on her own- just hit 70 – worked full-time whole life apart from approx. 9 mths off for each of 3 children
• Hoping to retire finally next year at 71!
• Small nest egg built up in Super (since females included in Voluntary Super) – then had to cash in Super (when it was still allowed) for deposit on home – to give children security of a “roof over their heads”
• Have just in last month paid off my home – 1st time mortgage free in 47 years - Finally hopefully will be able to live in retirement knowing have roof over my head (only way achieved was by using all of the proceeds from sale of my own business – so none left over to boost my Super)
• Sacrificed lifestyle – worked 60-70 hours week most of the last 25 years - to enable security in retirement throughout my working life – still won’t make it BUT will be just over the threshold for any pension entitlement
• Live and have lived frugally all my life so children could have the best opportunity / education to give them a fair start in their adult lives
• Assets will preclude from pension BUT at the same time will be “Income Poor” -Super will last approximately 10 / maybe 12 years BUT life expectancy - that is the totally unknown factor!
• If have to sell / remortgage home and downsize to enable “to be able to live” will this leave sufficient backup if have to enter aged care? Cost for a reasonable environment can be anywhere from a very conservative $500k - $unknown at the age it may be required
• Never received government assistance for anything in life –definitely not for any child care – paid from own income for over 25 years (10 yr gap -oldest to youngest child)
• Goal to save and invest to have the means to live out the rest of life – not as “wealthy’ but comfortable – ie not having to worry to meet the necessary expenses & hopefully have a “buffer” for the contingencies
• Maintained private health insurance since age 20 –to cover if have to contend with serious / costly illness
My question to ALL – please consider those who are:
- on their own; female; worked hard and paid their taxes
- in the Super balance disparity cohort (eg female compared to male)
- never taken nor received ANY assistance from the government
- Have just entered or are about to enter retirement - knowing full well it will not be an easy road financially to fund themselves within the current Superannuation / Pension environment let alone making it tougher for cohorts such as this
There are a myriad of other stories similar to this one.
It is just one example that highlights the complexity of this discussion and in particular the difficulty in determining the best answer to:
At what point (or asset value) is it fair and reasonable to draw the line?

And Jack illustrates the inequity of the current policy.

Take this example. My wife an I understood the problem Boomers presented in retirement. We invested in superannuation to be self-reliant in our old age. We have a modest house worth $400,000 (obviously not in Sydney) and $1.6 million (together) in super. We do not get the age pension but we have a very comfortable income. Bill Shorten wanted to demonise us as the “top end of town”.

My sister and her husband invested instead in the family home. They have a family home of $1.6 million and super of $400,000. They are the classic asset rich but income poor, pensioners. As the family home is not an assessable asset, they are regarded as so needy that they deserve the “welfare” of the full age pension at a cost to the taxpayer of $38,000 per year or about $800,000 over their lifetime, which is what my wife and I are saving the taxpayer by taking responsibility for our own retirement.

At death, both estates are worth $2 million. My children pay tax on my super death benefit, my niece pays no tax because the family home is also capital gains tax free. How is this equitable?


October 08, 2021

I always thought the Age Pension was a safety net, turns out it’s also a socialised funding mechanism for your children’s inheritance.

If you chose the put all you savings into a house and consequently didn’t save enough for retirement that’s your own fault.

Roger Richardson
October 27, 2021

Totally agree. There is a very strong argument for death duties/inheritance tax in Australia. Children of those who can afford to accrue home assets of $1M have a far greater advantage in life than those whose parents did not have the ability to accrue such assets. Death duties, which many countries have, would lessen this in equality.

October 03, 2021

Years ago I wrote to Julie Bishop (city MP) & Christian Porter (rural seat MP) about this very disparity between city vs rural constituents & the aged pension. No response. The politicians couldn't care less. In the meantime, the rural centres are being gutted as the smart retirees are moving to the city to pick up an extra million in Aged Pension (over the next 20 years of retirement). Whereas the retirees staying in the country are being impoverished. Its incredibly inequitable.

October 03, 2021

"Whereas the retirees staying in the country are being impoverished.":

October 03, 2021

If we still all agree that food, clothing and shelter should be present for the status of modern life to be achieved and that politicians are the administrators of that standard then they have failed to carry out their roles. Shelter used to be very affordable, especially those willing to make their own. Now we have laws/fees that leave all but the rich without options because we of the law we didn't pass, that to get become a leader you must posses the qualities of one. Instead we have the Scott Morrisons's of the world making our decisions!

October 03, 2021

Including family home as assets: I have heard of the family home equity being used to pay aged care costs for the more disabled of a couple leaving the partner without means to provide the same standard of aged care for themselves . How is the home asset not dependent on whether a single or couple is relying on the asset for future financial aged care support?

Wil Davis
October 03, 2021

The problem is to many government rules and regulations - the solution by government is always more rules and regulation. Adding more taxes like death taxes - or new tax rules to punish people who saved is wrong. Building wealth for your children & grandchildren is a noble cause vs pissing it away irresponsibly and the crying poor me poor me - punish my richer neighbour to make me feel better - yick

October 01, 2021

Graham.....I begin to despair! Jon Kalkman lays out the facts on Franking Credits..cut and dried! Then in come all the "but what if's...." , from people determined NOT to comprehend. The same with housing. Wanting the possessions of other people is called covetousness! Or envy, or good old fashioned greed! People make choices. Careers or jobs, to marry or not, to have children or not, to save for the future or not, to spend everything recklessly now and have 'good memories' for the future or not, to travel and enrich their lives or to stay put and consolidate [ like buying a house or a farm or a business] or not, choose to be honest or not, choose to take illicit drugs or not!

It is all down to individual choice! People can have all that and more by their own choices and exertions or not! So where does the idea come from that "the world owes me a living"?

I understand that welfare is at the root of all this "feeling of entitlement"; why do so many people receive welfare and become dependent on it ? About 10% of people through no fault of their own ARE deserving of welfare due to incapacity of some kind, born with a disability, injured, ill or whatever, and MUST be supported by the rest of society. Fair enough!

Why then is about 50% of the population receiving such huge welfare support that they are no longer actually tax-payers? THAT seems UNFAIR to me!

Not content with "no longer paying their own way in the world" they want to get their hands on the possessions of those who have always paid their own way, and made provision for their own retirement, by providing their own housing and income, and perhaps other assets as well. It seems to me that "buying votes" has distorted, perhaps fatally, the sense of responsibility that people should exercise in providing for themselves and their families and for their own retirement.

Either way, no matter how clearly YOU lay out the facts and explain them, the "what about me?" types dispute everything and anything that doesn't benefit them...when a few correct decisions and choices would make all the difference !

October 19, 2021

Honest, succinct and erudite explaination of 'consequences of choices' leading to the current state of affairs

October 21, 2021

Well put Trevor. We don't get a pension and don't expect one -- we made choices in our married lives which weren't easy, but so what! Just leave us alone and stop the grabbing....we've moved 28 times for work and it's taken a toll on us and our family, including elderly parents when they were still with us. When did everyone get so critical of those who quietly get on with life? If we can just be good citizens, help out when we can and do no harm, what's wrong with that?

October 01, 2021

I think the current pension rules are adequate. The family home should continue to be exempt from the pension assets test. My husband and I love our home. It is 100 years old and we have spent our hard earned wages making it comfortable for children, now grandchildren and friends. Yes it is now worth 2 million but we have paid high council rates and worked weekends and holidays just to maintain its worth. We only have 550k between us in super and we have 3 years till we can get a part pension. We have both worked from the age of 15. Why should we sell and leave our home because of its worth??? We have never been eligible for any Centrelink benefits, no part A or B child rebate,no unemployment benefits and endured high intetests. We have paid Medicare levy, paid into private health insurance and have been no burden on the public health system.Leave the primary residence alone people!!!

October 01, 2021

"Endured high interest rates". This is a furphy that continually gets repeated; the average price that a house cost versus the average wage in those times meant that when you also consider wage inflation (i.e. port those conditions to today), the 'horror' 17% interest rates were more like 7% by today's standards for the same sort of house.

I'm sorry, but there is nothing particularly special about your circumstances because everyone else does the same - "paid high council rates and worked weekends and holidays just to maintain its worth", "worked from the age of", "never been eligible for", "paid Medicare levy, paid into private health insurance and have been no burden on the public health system".

Seems that a house is very emotive; far less so than if you said "I've got $2m in CBA shares / $2m in family heirlooms / art, why should I sell them because of their worth ?". How is that any different, especially if I was smart, invested wisely and worked hard ?

I doubt that Gen X and everyone else after them will get their house exempted, it will be case of "if you want a pension, sell your house", "you don't get one, your house is worth enough" and the best Catch-22 will be that if you want a pension, you'll have to sell your expensive house but then, you've got so much cash, you won't qualify for a pension and now you have no house.

October 03, 2021

"it will be case of "if you want a pension, sell your house", "you don't get one, your house is worth enough"":

The ultimate Age Pension Asset Test:

Assets $nought, full pension $0 / y.
Assets $squillion, part pension $0 / y.

Perfect equality and fairness: rich or poor receive exactly the same: $0 / y.

October 14, 2021

October14 2021
We are in the same situation. My Husband is 80 and I am 76 we have worked from age 15 and 18, my Husband
was a shift worker on his days off he worked for another company, all of our money went into buying and maintaining our house we also bought 2 other property's which we sold when my Husband Retired, but still worked part time till two years ago. I also worked part time when the boys were at school.
We have three Sons who have never relied on Centrelink benefits. My Husband and I have had private health
Insurance and paid Medicare Lev. Our House is valued at 1 million and we have just over 400k. I know some people would think at our age 400k would last us till we pass. I think people who work there B off most of there lives should be entitle to a full Pension, after all the Taxes we have paid and not got any thing in return.

October 14, 2021

"Our House is valued at 1 million and we have just over 400k.":

You are age and asset eligible for Age Pension from Bank of Centrelink. You will likely need to provide about all your assets as bond for age care - more $ nicer care.

Phil Crichton
October 01, 2021

We retired in 2009, caravanned Oz for 4+ years.Only had $150k savings after cashing in meagre super. We chose renting in country Qld because cities and coast were too dear.
After a small inheritance, and astute share investments , we now have $580K in shares, a quality car, and gross +\ - $90K incl the pension and still rent .We have a comfortable lifestyle with a steadily rising income forever. My advice - cash in super, buy dividend shares, either downsize or rent in a regional town and ditch your financial advisor.
The pension rules are quite generous but many people stupidly stick to their overpriced home and live like hermits.
Super is like a leech, sucking exorbitant fees, and running out when you need it the most.

Ian hanlon
October 08, 2021

You’ve been lucky Phil

September 30, 2021

Nah, doesn't seem fair.

Wouldn't the retirees who own that now $2M property have paid much more for that house than retirees who own now $500K property? And more in rates, etc?

How can it be equitable than to penalise them?

The penalty needs to be an inheritance tax.

Don't penalise the folk who worked hard and paid (more) for a property through the years (and probably also much more income tax through their working lives) that simply happens to be worth more than someone else's!

Michael B
September 30, 2021

Our politicians don't have the b**ls to make decisions of such significance as their livelihoods are in jeopardy at the next election. There is no leadership in the parliament for the country's welfare, only personal as many of the comments elude to. The 100 billion in debt due to the pandemic has to be paid off by the next generation.

October 01, 2021

My point exactly re: Gen-X and everyone else after them being the REAL self-funded retirees. This is why there won't be a pension available to us when we retire, and if there is, you won't want it or qualify.

October 11, 2021

Please add another 100 billions and a lot more for their ongoing maintenance for our stupid acquisition of 8 Subs to patrol the areas around china and make ourselves a big target to be nuked . In effect pay for and do the dirty works for those who really benefit from a world in perpetual conflict.
And who is that, you ask.
Always remember the real rulers/culprits.... the 1 percent.... our political class receives all it's instructions/directions by this small group. It's all about them and their Greed. You and I are simply the consumer who replaced the ignorant peasants. Otherwise, in one of the wealthiest countries in the world, Australia, there should be zero tolerance for homelessness and large real taxes for the super wealthy.

September 30, 2021

Time to consider a universal basic income

September 30, 2021

I agree that those of us who retire debt free and with sufficient super have no right to expect government support. I am 79 female,widowed. As a result of hard work no inheritance an sound management skills no need for financial support however in Victoria due to the lock down I cannot access any My Aged Care assistance for which I am perfectly willing to pay, but I am not going to pay an additional sum for the beaurocracy. So despite a broken back I am expected to clean my own floors because my cleaner isn't allowed house, but the same cleaner is Llowed in the house next door because she gets a pension. I feel like a second class citizen who has paid tax every year since 1960

K. Bailey
September 30, 2021

Male on his own - does that mean no kid responsibilities? The female story included 3 x 9 month work breaks for childcare and then funded them for probably at least 25 years. It makes a big difference.
Females traditionally have not been dealt with equally. Those starting out today are on a more even footing but for (your) generation, it was a different story.
Agree, manual workers of your generation have paid a high (physical) price to get to retirement and I am not sure that everyone understands this. The O H & S standards these days mean that the physicality of manual work is better supported.
The aged pension was designed with the expectation that men would be more likely to pass in the first 5 years of retirement so, at least we have come a bit further from those beginnings.
The debate is really about what assets should be considered when deciding age pension eligibility. The disparity between city and country house prices should be a consideration and a limit should apply.
Those in high value homes will disagree as it is still their home but I suspect if the policy is instigated, financial arrangements will be constructed to suit.
For you "here", if there was a more equitable system for aged pension eligibility, there would potentially be more to improve your retirement quality of life.

Kien Choong
September 30, 2021

We ought to have an inheritance tax!

September 30, 2021

we already have one it is called a transfer tax rate of 17% on the estate and any superannuation component of the estate that had a tax benefit to the original owner will needed to be paid prior to transfer

SMSF Trustee
September 30, 2021

And Capital Gains Tax on the sale of inherited assets.

October 15, 2021

Who pays that? Everyone cashes in before passing away to avoid it.
No one mentioned the tax free status of capital gains on trophy houses, where $10s of millions in capital,gains are completely tax free.
How about capital gains on profits earned on homes over $5m?

September 30, 2021

"And Jack illustrates the inequity" etc;

A classic example of the inequity of the current arrangements.

There's got to be a change to this crazy system.

September 30, 2021

"In light of all the comments made, please consider the below:
• Female – on her own- just hit 70"

How does being female change things, I thought we live in an age of equality, so bringing in one's gender does little to advance the argument.
How differently would the scenario differ if it started thus:
"In light of all the comments made, please consider the below:
• Male – on his own- just hit 70" (manual worker all life, body wrecked).

September 30, 2021

- Gender pay gap
- Time out of the work force to care for babies
- Part time work when children are young
- Gender is relevant here because women generally have much lower super balances than men


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