Retirees ‘upsize’ the family home to get the Age Pension

Expert says older Australians are buying more expensive homes in retirement to hang on to the Age Pension | PODCAST

‘I made that step and I couldn’t be happier,’ says Gabrielle, with her grandson Tom at her Sydney apartment on Tuesday. Picture: Nikki Short

Older Australians are buying more expensive homes in retirement to hang on to the Age Pension, according to experts who say pension eligibility rules are causing nationwide over-investment in housing.

Part four of On the Fence, a podcast on the housing market, looks into the pitfalls of down­sizing, navigating the pension ­assets test and the rise of “elder abuse” with Heidi Schwegler, a fin­ancial planner at AHS Financial, Ian Yates, head of the Council for the Ageing, and Megan ­Soloman, a psychologist from ­Relationships Australia NSW.

“I’m finding there is definitely a rise in cases (of elder abuse). I’ve had two examples recently where a person took their aunt — she doesn’t have children of her own — down to the bank systematically every single week, got her to cash in her pension and then walked off with it,” said Ms Schwegler, who is also a justice of the peace.

“I saw some at the hairdresser when this poor little 91-year-old lady was in tears saying goodbye to her hairdresser because her kids had shipped her off to a nursing home and she had to say goodbye to the hairdresser she’d been going to every week for 25 years.”

Ms Solomon, a family therapist, said elder abuse was “a huge and growing concern”.

“There are (even) terms coming out, things like inheritance impatience, where adult children are wanting the money now to help set them up, perhaps, and are hoping their parents might sell their home in order to help give them a leg up” she said.

“Or there’s inheritance conservation, where they want that money preserved for them. So they don’t want their parents spending lots of money either on travel or health issues or big new homes with new furniture.”

Ms Schwegler, based in Victoria, said financial planners were required to report money launder­ing and terrorism “but we don’t have any procedures when it comes to elder abuse, that has been made policy”.

Gabrielle, who downsized in 2017 in Sydney from a five-bedroom house in northern Pymble to an apartment in southeastern Kensington, said she had had a dream run with a supportive family, and had made a relatively smooth transition to apartment living. “If somebody would have told me five years ago that from living in a leafy, quiet suburban big home … I shall move into a noisy city multi-apartment building, I would have said, ‘You must be joking. I’ll never do that.’ And yet here I am — I made that step and I couldn’t be happier,” she said. “The biggest challenge was leaving all the memories behind.”

For all the emphasis on downsizing, “upsizing” to keep the pension was also common, the panellists said.

“(People) feel as though it is their right, I will crawl over hot coals to get $1 of pension and if that means I have to sell my home and buy a more expensive home, then I will,” Ms Schwegler said. Because the principal place of residence is exempt from the asset test that determines eligibility for the Age Pension, “they might throw $50,000, $60,000 at a renovation just so they can get on to the assets test and get an Age Pension”.

Mr Yates said the pension and seniors health cards were “things people do grab hold of”, and some pensioners had a “very strong feeling” very valuable houses should affect pension eligibility.

“People will say I’ve got an ­average kind of home, I’ve got my fin­ancial assets, and I don’t get the pension or only a little bit. And my mate who’s worth exactly the same but (has) invested heavily in the house, he’s getting a full Age Pension. That’s not fair,” he said.

“Our tax system encourages people to over-invest in housing and not invest properly in their ­retirement income.”