The system for supporting retired Australians is said to rest on three pillars: the age pension, superannuation and the family home.
The pension, particularly its adequacy and eligibility age, has long been a topic of discussion. More recently a lot has been said about problems with superannuation, such as the supposedly poorly targeted tax concessions, and inadequate balances for low income groups.
In comparison to both these subjects, very little is ever said about the underutilisation of the family home in supporting the needs of retirees.
According to ABS data on housing occupancy and costs from 2011-12, more than 80% of households over 65 and 85% of households over 75 own their own home. pproximately 90% of those households who own their own home do not have a mortgage.
The average value of the equity in the family home for couples over 65 in 2012 was $551,000, while for singles it was $452,000 and growing rapidly. In the 15 years prior to 2012 median house prices more than doubled in real terms and more than tripled in nominal terms.
In the twelve months to September 2014, Housing Industry of Australia economic data found that house prices in Sydney and Melbourne grew 14.3% and 8.1% respectively, though they were slower elsewhere in the country.
Meanwhile the annual full pension (including supplements) for couples is $33,488, while for singles it is $22,211.80.
While the family home is exempt from the pension assets test, the difference between the assets means test for homeowners and non-homeowners is just $146,500, less than a third of the average home equity people of pension age actually have.
This suggests that non-homeowners are substantially disadvantaged by the current settings. Exacerbating this problem is the higher costs that non-homeowners who are renting face, and while rent assistance may alleviate some of this concern it may not cover the increased costs faced by some who rent in capital cities.
A significant concern is the relative difference in wealth and living standards between pensioners who have substantial reserves bound up in property and those who either do not own their home or live in rural and remote areas where median house prices are substantially lower than capital cities.
The differences in pension entitlements between these groups does not reflect the differences in their means.
There may be good policy reasons for exempting the family home, but we should not be blind to the equity implications of these policy choices.
Simon Cowan is a Research Fellow at The Centre for Independent Studies.
Home > Commentary > Opinion > The third retirement pillar – home equity and pension inequity
The third retirement pillar – home equity and pension inequity
The pension, particularly its adequacy and eligibility age, has long been a topic of discussion. More recently a lot has been said about problems with superannuation, such as the supposedly poorly targeted tax concessions, and inadequate balances for low income groups.
In comparison to both these subjects, very little is ever said about the underutilisation of the family home in supporting the needs of retirees.
According to ABS data on housing occupancy and costs from 2011-12, more than 80% of households over 65 and 85% of households over 75 own their own home. pproximately 90% of those households who own their own home do not have a mortgage.
The average value of the equity in the family home for couples over 65 in 2012 was $551,000, while for singles it was $452,000 and growing rapidly. In the 15 years prior to 2012 median house prices more than doubled in real terms and more than tripled in nominal terms.
In the twelve months to September 2014, Housing Industry of Australia economic data found that house prices in Sydney and Melbourne grew 14.3% and 8.1% respectively, though they were slower elsewhere in the country.
Meanwhile the annual full pension (including supplements) for couples is $33,488, while for singles it is $22,211.80.
While the family home is exempt from the pension assets test, the difference between the assets means test for homeowners and non-homeowners is just $146,500, less than a third of the average home equity people of pension age actually have.
This suggests that non-homeowners are substantially disadvantaged by the current settings. Exacerbating this problem is the higher costs that non-homeowners who are renting face, and while rent assistance may alleviate some of this concern it may not cover the increased costs faced by some who rent in capital cities.
A significant concern is the relative difference in wealth and living standards between pensioners who have substantial reserves bound up in property and those who either do not own their home or live in rural and remote areas where median house prices are substantially lower than capital cities.
The differences in pension entitlements between these groups does not reflect the differences in their means.
There may be good policy reasons for exempting the family home, but we should not be blind to the equity implications of these policy choices.
• Subscribe
Subscribe now and stay in the loop with our giving appeals, event alerts, newsletters and research updates.
We are always pleased to hear from you. If you have any questions or feedback, please contact us here: