“Why the urgency for seniors to downsize?”

MoneyQuest CEO calls for seniors to be afforded more respect and warns of the unintended consequences of pursuing seniors to prematurely downsize.

Recently appointed MoneyQuest CEO, Michael Russell, has welcomed the decision of the Federal Government to not include the family home in the aged pension assets test and commended last week’s statement by the shadow Treasurer supporting the decision.

“Any recommendation to include the family home, such as that by The Actuaries Institute in their September 2015 report titled, For Richer, For Poorer, is tantamount to bullying. The big stick approach is an appalling way to deal with seniors and should not be tolerated.

The Superannuation Guarantee Levy was only introduced into Australia 23 years ago and as such the majority of seniors worked for most of their working lives without the benefit of what we now know. Yes, seniors are placing a heavy strain on our aged pensions system and yes we know it’s going to get worse before it gets better, BUT those who are asset rich, income poor have fundamentally done nothing wrong but raise families, educate their children, pay taxes and contribute significantly to our nation’s economic strength and cultural diversity”.

There has to be another way and Michael Russell and MoneyQuest believe there is.

“While the carrot must always be the only option when dealing with seniors, the Federal Government’s present thinking to give retirees who downsize a one-off exemption from stamp duty and then quarantine the sale proceeds of their family home, is the preferred approach – providing of course we should in fact be incentivising them to downsize in the first place.

This to me is the real issue and I don’t believe it has commanded enough consideration”.

Virtually everyone seems to be in a hurry to have seniors downsize. Reasons range from improving housing supply and affordability, to being able to create new income streams to improve their quality of life in retirement and to potentially contribute more to national consumption and spending.

All good outcomes BUT will housing supply be improved, will the quality of life for seniors be improved and will the sale proceeds of their family home actually manifest into something contributory?

In the main Michael Russell suggests not.

He explains, “Firstly, the notion that housing supply will be enhanced to improve affordability with seniors downsizing is fundamentally flawed. To be encouraging seniors to prematurely downsize in a hot housing market and then compete head on with first home buyers and investors for much sought after property, can only lead to a further imbalance in the market. First home buyers would most likely be further shut out with the price of smaller footprint properties escalating at a time when regulators such as APRA are desperate to cool.

Secondly, there is plenty of research supported by anecdotal evidence to suggest that a senior’s quality of life and longevity is actually enhanced while remaining in the family home for as long as practical. To this end, MoneyQuest is un-ashamed of its support for reverse mortgages to assist ‘asset rich, income poor’ seniors to unlock the equity in their home and truly improve their quality of life.

In the absence of any contrary solutions, both sides of Government are urged to endorse the product to get it out of the shadows and into the light, as a legitimate funding solution. Yes, we must ensure that it is well understood by seniors BUT let’s not discriminate by assuming our seniors are incapable of making an informed decision. And while we’re at it, let not the fear of disgruntled beneficiaries stop us from doing the right thing in providing a workable solution”.

Third and finally, Russell said there is little evidence to suggest that downsizing surpluses will manifest into strengthening our national GDP.

What he did say was that to significantly strengthen GDP and help to ignite struggling GST revenues,  Reverse Mortgages need to be more widely endorsed so that potentially we could unlock some of the $920 billion, over 65 year old home owners have built up in housing equity. “With over 80 year old borrowers generally able to unlock up to 32% of their home’s value, this would equate to up to $294 billion in potential consumption spending and the generation of game-changing GST revenues. All while respecting the rights of our seniors to stay in the homes and elect to do with their home equity as they choose.

The key words being ‘as they choose’ given that ‘asset rich, income poor’ seniors have earned the right to make their own decisions and be better respected for doing so. Yes we need to recognise their vulnerability and protect them from unconscionable conduct, but from a reverse mortgages perspective legislative controls and fail-safes are already in place”.

For more information, call 1300 886 100 or visit www.moneyquest.com.au

• SHARE