Unlocking the family home asset for older Australians
In the new aged-care rules of co-payments this suggestion from Derek McMillan is chief executive of Australian Unity Retirement Living in The Australian is a different and useful policy advice:
Look at an example: a couple in their late 70s have a home worth $800,000. They consider downsizing to an apartment or moving into a retirement village, either of which would cost about $500,000. Selling up will leave $300,000 in the bank; under existing rules that would be incorporated into the assets test, significantly reducing their pension. But remaining where they are is becoming more difficult physically.
Those concerned that an older person is double-dipping — collecting a full pension while also receiving interest from proceeds of the sale of the home — should consider the alternative: not moving house, still drawing the pension and having no cash to co-contribute to care costs. And this risk could be further mitigated by introducing age-based (say, over 75) or asset-based (say, $350,000) limits.
In this complex policy debate, it must be remembered that the vast majority of older Australians are full or part pensioners. This won’t change any time soon.
The new aged-care rules require recipients to make a greater contribution to the cost of their care under a co-payment regime.
A critical element of making this system work should be to allow them to unlock the equity in their home without severe financial penalties.