Assessing eligibility for the pension against the family home
At what point should the value of the family home be taken into account when assessing an individual’s or a couple’s entitlement for the pension?
There’s been a proposal from an ACT academic to reduce the pension for older people whose homes are valued at more than $2 million. He says this would save the federal budget about $6.3 billion.
I think this is an interesting conversation.
From a technical economic perspective, taking into account all assets (including the family home) when assessing eligibility for the pension is the right thing to do.
At the moment, all assets except the family home are taken into account. But if a government were to place a value cap on properties, whose assessment of value would be taken into account? Would it be based on rates notices? Or tax returns (which many pensioners no longer lodge)? Or something else?
From a political perspective, making these sorts of changes to pension eligibility would be political suicide. No government – or opposition – would ever go near it.
Interestingly, the complete counter to this argument would be to give every person over a certain age a universal pension of the same amount, without any means testing, like they do in New Zealand.
Truthfully, I have no idea how the NZ government affords it, and our government certainly couldn’t fund a universal pension. But it’s an interesting idea.
Overall, I think this conversation around capping the value of the family home is a good one, but a $2 million valuation is probably on the low side, and good luck to any politician who proposes it as policy!