Unlocking home equity in retirement

New ABS figures prove the need for a policy shift for seniors, with one third of older Australians in low income households considered ‘asset rich’ and ‘income poor’.

Data from the Australian Bureau of Statistics concludes one third of older low income households have less than $5000 in cash and other liquid assets, with nearly their entire wealth locked up in the family home.

“A typical older Australian will have $600,000 in property assets but will be living day-to-day on a fixed income”, says the Property Council’s executive director of Retirement, Mary Wood.

“We need to put in place the right policies that help older Australians downsize. All too often, a pensioner considers downsizing only to reject it because it would mean a hit on their pension.

“Many older Australians have a desire to move to more age appropriate accommodation, like a retirement village apartment or villa, but will be hit with a reduction in their income despite owning exactly the same amount of assets if they make the move.”

Wood says many of the reasons for downsizing are health-related – with people looking for homes without steps or wanting to be free of the big backyard.

“It makes little sense, both from an economic and a health and wellbeing perspective, to trap older people in large and often unsuitable family homes, with little money available to spend.”

The Property Council proposes an adjustment be made to the means test, to exempt some proceeds from the sale of the family home by full-rate age pensioners aged over 75. Wood says the cost to the Budget is “minimal”.

“This type of targeted reform that removes the current disincentive to downsize will benefit income poor pensioners, as well as make the pension system fairer and more sustainable.”

Download the Property Council’s Unlocking home equity for senior Australians to free up extra retirement income.