ABS figures prove need for downsizing help for seniors: PCA's Mary Wood

GUEST OBSERVER

New statistics showing one third of older Australians in low income households are ‘asset rich’ and ‘income poor’ demonstrate the need for new policies that will help them unlock their home equity in retirement. 

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. 

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. 

The reasons for downsizing are often health related – wanting homes without steps, or big backyards to maintain, and lower rates and utility costs. 

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 is proposing 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. 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.

Mary Wood is executive director, Retirement, Property Council of Australia and can be contacted here.