When downsizing your home, it’s essential to consider the impact on your pension. The issue has persisted for years, exacerbated by changes to the pension asset test in 2017 and rising property prices. However, there’s a potential solution that could benefit retirees: the reintroduction of a pensioner savings account.
Background: Pensioner Savings Account
The Productivity Commission’s 2011 report on Caring for Older Australians highlighted the need for a pensioner savings account. This account would allow full and part pensioners who downsize their homes to contribute the proceeds from the sale while keeping it exempt from pension assets and income tests. By removing financial barriers, we can address the housing crisis more effectively.
Past Attempts: Housing Help for Seniors
In the 2013-14 budget, the government announced the Housing Help for Seniors pilot program. Seniors could invest 80% of their home sale proceeds (up to $200,000) into a special account. This account would remain exempt from pension means testing for ten years, provided no withdrawals occurred. Unfortunately, the pilot never took off, as it was canceled in the 2014-15 budget.
Recent Changes: Pension Asset Test
In 2017, the pension asset test underwent significant changes. Full pensioners saw an increase in the allowable assets, accompanied by a doubling of the taper rate. Before 2017, the taper rate was $1.50 per thousand dollars of assets; now, it stands at $3.
As policymakers grapple with the housing crisis, revisiting the pensioner savings account concept could provide a practical solution for retirees looking to downsize without jeopardizing their pension.
The original article was published in The Sydney Morning Herald.
