Impending federal election reignites debate over age pension means test

The renewed call comes in the lead up to the Federal Election and is based around the advocacy group’s own research (from 2017) which, from the 5,770 surveyed, suggested that while more older Australians wanted to downsize, the financial impact on their age pension was a big barrier.National Seniors Chief Advocate Ian Henschke says the $250,000 exemption they are calling for would encourage older Australians to downsize to age-suitable safe housing, put more housing stock on the market, and improve housing options form more Australians – including first home buyers.

“Many older people live in housing that is inappropriate for their needs and difficult and expensive to maintain,” he says.

“This increases the risk of injury and hospitalisation. It can also bring on early entry into residential aged care.

“Many older people cite home maintenance issues as a key motivation for downsizing, while others are keen to stay in the home where they have raised their families or in an area that’s familiar.

“But if they could sell without losing their pension, there’s no doubt many would.

“This would free up existing homes for families and promote the construction of purpose-built homes for older Australians, as another key barrier to downsizing is a limited supply of ‘accessible’ housing stock with universal design features.

“It would also help address the aged care crisis by freeing up funds for older Australians to delay moving into residential aged care, purchase the home care and health are services they need, and avoid some of the issues to be investigated by the Aged Care Royal Commission.”

The Department of Social Services (DSS), who control the age pension, say that the current means testing has been used by Australia’s social security system for most of its hundred year history to “make the system fair, affordable and properly targeted to those most in need”.

“Providing a means test concession for the proceeds realised from the sale of a pensioner’s former home would have large fiscal costs would likely be ineffective in achieving behavioural change/take-up; and would have a negative impact on the equity in targeting of social security payments.” a DSS spokesperson says.

“The pension means test is designed so that pensioners are better off overall if they free up capital by downsizing because they can use the freed up savings to generate income and draw down over time to support a higher standard of living.”

The Spokesperson adds that an asset test exemption currently applies where an income support recipient sells their principal home and is intending to use the sale process within 12 months to purchase another home.

In this exception, a portion of the proceeds that will be used to buy or build another home are exempt for up to 12 months from the date of sale.

The DSS also note a 2015 Productivity Commission research paper – Housing Decisions of Older Australians – which they say did not find any evidence that financial factors, including pension means test, are a major factor influencing pensioners’ downsizing decisions or a significant barrier for people who wish to downsize.

“Many pensioners downsize under existing means test arrangements and they already have a financial incentive to downsize,” the DSS spokesperson explains.

“Decisions to downsize are motivated by health, lifestyle and family considerations and are generally not motivated by financial factors.”

National Seniors are calling on any interested parties to join their Rightsizing campaign.