REMOVING penalties that apply to selling the family home could encourage more pensioners to downsize and unlock about $1 trillion in housing wealth owned by people over 65.
An Institute of Actuaries of Australia paper on unlocking housing wealth has urged measures including targeted stamp duty relief for older people wanting to downsize, capped relief from the age pension means test for people taking out reverse mortgages, more help for older renters, and a possible cap on the exempt value of the family home for age pension assets test purposes.
The paper says Australians aged over 65 suffer the second highest relative income poverty rate in the OECD.
About 36 per cent of those aged 65-plus have an income less than half the national median household income, second only to Korea where half of seniors live in relative income poverty.
“Older people face a dilemma – they are often asset rich, but income poor,” institute president Lindsay Smartt said. “The combination of easier access to a large pool of wealth and the vulnerability of older people creates a significant risk that needs to be managed.
“Equity access products will require strong safeguards to protect the homeowner.
“The overriding consideration of the institute is that if retirees want to access their housing equity, it should be easy and safe to do so.”
The paper discusses options including a review of equity release schemes to ensure security of tenure and standard, simple disclosures. It suggests a review of banking practices to make it easier for seniors to access bridging finance when downsizing.
Homesafe Solutions managing director Peter Szabo, who has offered an equity release product for seniors since 2005, welcomed the new discussion around retirement incomes and the family home.
He said selling the family home was not the only alternative for seniors who needed to access the wealth tied up in their property. Instead, he said his organisation’s pooled residential investment scheme allowed homeowners to sell a share in the future sale proceeds of their home for an immediate cash sum, giving the owner certainty that they would always retain their share of the sale proceeds.
“Seniors have a right to live in a home that meets their needs in an environment in which they are comfortable,” Mr Szabo said.
“Now, while time is on their side, the government needs to address issues with a proactive, principles-based approach, as the current product-based regulatory framework is not meeting the needs of retirees.”
