Pension Reform !

It is suggested that the family home now be included in the asset test to determine eligibility for the aged pension.  Under the present guidelines, a couple may have assets to the value of $ 279,000 and a single person to $ 196,750 for the full pension, but a part pension will be granted with assets measuring $ 1,110,500 for a couple and $ 748,250 for a single person.

It is a fact of life that many people are asset rich - and cash poor.  Including the family home in the asset test would bring the vast majority of home owners into conflict with eligibility.   At today's values, few homes would be under that $ 279,000 mark and their owners would therefore be denied the full aged pension.

This draconian suggestion has socialist implications.   The socialist movement opposes any form of inheritance.   People enter this world with nothing - and the true socialist believer thinks they should exit it in the same state.   Most families get comfort from the fact that when their life ends they may give their children a start in life when they inherit items such as the family home.

Over the length of time that Australia has been a self governing country, the family home has  occupied a cherished form of protection.   Home ownership has been the goal of most young couples and in their early years they usually scrimp and save to put together a deposit.   Owning ones own home is probably the apex of financial security.

Obviously, the government is concerned at the ever growing outlay on aged pensions and needs to reform pension laws, but do we really want to force the aged to sell their homes and live on the proceeds - until this dwindling asset base reduces to pension eligibility ?

 This is a conflict between reasonable asset limits applied to non home owners - and the extraordinary increase in value that has applied to all forms of housing in the past few decades.    The ratio of the value of the average home to the rate of average income has widened to sharply increase the asset holdings of those who do - against  those who do not - own some sort of dwelling.    If the family home is included in pension eligibility - this gap widens further.

No doubt the bean counters will shuffle figures to try and find a solution, and the obvious answer will probably be an upper limit at which the family home becomes included in the pension asset test.   The danger here is that whatever limit applies now, if it is not constantly reviewed it will get out of kilter with reality. Housing prices are subject to price " bubbles " - and in some instances can suffer rapid devaluation, as happened in 2008.

The dilemma for government is that " happenance " has divided Australia into a split money culture.   The phenomenon of rising home prices has created paper wealth for those owning their own home and a vast disparity with others.   To include homes in the asset test is to " punish " those who made the sacrifices necessary to achieve home ownership - and they will be unrelenting in their political fury.

This is a suggestion that only the brave - or the very foolish - will undertake lightly !