As debate continues over ‘means testing the family home’, new polling shows 1 in 2 Australians think the government should require retirees with expensive homes to fund their own retirement incomes, through an existing but little known government scheme called the Pension Loans Scheme (PLS).
“The PLS is essentially a government provided reverse mortgage, but it is available at present only to those who don’t receive the full pension, instead of anyone who is able to use it,” TAI researcher, Tom Swann said.
“In all the political debate about means testing the family home, few politicians seem willing explain the solution that already exists. This polling shows the will support unlocking substantial home equity to help fund retirement, if politicians are willing to explain it.”
Papers from The Australia Institute (TAI), Grattan Institute (pg 38), Per Capita and recently the Centre of Independent Studies (CIS) have all argued PLS-style schemes could make the retirement income system fairer. An expanded PLS could allow retirees to boost their own income and it could allow governments to make wealthy homeowners fund more of their retirement income.
The national poll found that most people think retirees who own and live in an expensive home should still receive some form of pension. But given a one sentence explanation of the PLS – ‘an existing government program that allows wealthy retirees to stay in their home while borrowing against it to receive a fortnightly income, equivalent to the age pension’ – 50 per cent of respondents said ‘Retirees should fund their own retirement through the PLS’, compared with 28 per cent who said ‘The government should still pay them the age pension’.
“Even apart from the PLS, there was also support for the idea that the value of an expensive home should count in some way. 46 per cent said those who own and live in expensive homes should get a part pension, rather than a full pension. This requires including more of the family home in the means test. Retirees could then use the PLS to boost their income.
The TAI survey allowed respondents to specify what they meant by an ‘expensive’ homes. 2 in 3 agreed a home over $1 million is expensive. But opinions about pensions and the PLS did not vary substantially with views about how much an expensive house was worth. This suggests support for the PLS is not strongly dependent on where a means test threshold is set.
“Think Tanks of different perspectives are all arguing for an expanded PLS. Politicians from any party could take this on,” Swann said.