Earlier this afternoon ABC News reported that the Productivity Commission’s discussion paper is suggesting that retirees would enjoy better quality of life if they sold their homes in lieu of relying on the Age Pension.
The paper argues that most retired Australians are engaged in unnecessary, precautionary saving into their golden years, and are more likely to cut spending than draw on the wealth that is their home.
The report suggests a better option for retirees would be to draw on home equity and stop relying, or rely less on, the pension.
The Combined Pensioners and Superannuants Association’s Amelia Christie said it’s not so simple.
“Inbuilt into the age pension is the assumption that people own their own home. It’s only enough money to live on just if you do own your own home,” Ms Christie said.
“And that’s increasingly not the case for people. People renting in their retirement are fairing a lot worse than home owners.
“Importantly though this is the only asset that people have. They need it to be able to survive on the age pension.
“And this idea that keeps on being floated around that older people are somehow not allowed to stay in a free standing home anymore is just ludicrous.”
Ms Christie also pointed that the reverse mortgage market in Australia is very small.
“The last time we looked at it there was only five lenders in Australia and that was post GFC where it went down from 15.”
“There’s also the issue of course that people across the country aren’t able to access reverse mortgages. They are only available to people in areas that the banks think will increase in value. So if it wasn’t across the board we wouldn’t have a fair system.”
She pointed out that many people don’t want to down size – and that there are many reasons for this, some more complex than others.
“It’s not just because they want to stay in that home – and of course that’s a valid reason as well – but there’s a lot more things at play here,” Ms Christie said.
“The other issue is that increasingly people are needing to use their house to fund residential aged care if they need it and you can’t use the home twice.
“You can’t be eating your home, for starters, you know living on it on a daily basis through the income it’s generating and then be able to cough up money for an aged care bond should you need it.
“So we need to make sure that – you know, the home is not a renewable resource that people can just keep tapping into and be expected to fund their retirement and any care needs they have.
“We need to make sure that older Australians are adequately looked after and that they are able to have some sort of security as well.”