Could the family home be the “secret” to making housing more available for families while fuelling a wealthier retirement for struggling retirees? 

That’s the essence of a dialogue paper by the Actuaries Institute – More Than Just a Roof: Changing the Narrative on the Role of the Home – which calls for a rethink on how the home is traditionally viewed, changing from a “nest egg” to a key financial asset retirees can use as an income stream in retirement. 

Downsizing or reverse mortgaging the family home as a source of income for asset rich but cash poor retirees is not a new idea. However, this report goes further by asserting retirees have too much money tied up in housing and governments should encourage them to divest through carrot-and-stick policies, including means testing. 

The paper says more than 80% of Australians aged 65 to 74 live in their own home, with retirees holding an estimated $1.3 trillion worth of housing equity. However, many do not view their home as a financial asset that could be more actively managed beyond potentially helping to pay for future aged care costs and as a bequest. 

“If retirees accessed 20% of the $1.3 trillion they hold in home equity, it would unlock about $260 billion to help fund what could be 25 to 30 years or more in retirement,” paper author and actuary Andrew Boal said. 

Most recommendations are aligned with National Seniors’ long-standing advocacy for practical policy measures to enable seniors to downsize, without affecting Age Pension payments. 

Downsizing can help provide retirees with an income boost and with transitioning into safer and more manageable housing. National Seniors Australia recommends governments exempt excess sale proceeds from the Age Pension means test for Home Care Package (HCP) recipients over 80. Our Better Housing policies are available here. 

Andrew Boal’s paper suggests governments should: 

• Remove or refund stamp duty for over 55s who downsize their home 

• Extend access to downsizer contributions to superannuation to also include amounts released through an equity release scheme, such as a reverse mortgage 

• Relax the Age Pension means test for part of the value of equity released from the family home when it is sold (e.g., $300,000 per person/ $600,000 for couples) 

• Provide Age Pension means test relief on money accessed through home equity release schemes, such as reverse mortgages, up to the same cumulative limits. 

It’s the following recommendation that National Seniors opposes:   

• Gradually include part of the value of the family home, above a reasonable threshold, in the Age Pension means test. 

National Seniors does not support pension means testing the family home. 

Rather than means testing the family home, National Seniors Australia wants a more comprehensive, fair, and equitable solution – namely, simplifying the pension system by doing away with complex means tests, income tests, and asset tests. 

Introducing a universal pension with appropriate tax reform is the way to achieve this and solve many of the problems that exist from the home being excluded from the pension tests. 

Under the current Age Pension rules, older people risk reducing or losing their pension if they downsize because the house sale is potentially counted in the pension means tests. 

A universal pension would remove that disincentive and encourage people to downsize, allowing them to contribute their housing wealth to more productive assets such as superannuation, savings, and health and age care. 

Another benefit is that a universal pension would fundamentally remove interactions with Centrelink, including the need to regularly declare earnings and assets, providing significant cost savings to government. 

The change could be made cost neutral through tax reforms. For example, in Canada, there is a pension recovery tax that recoups the cost of the pension among higher income earners.