More asset stripping of the aged

Carnell_c5fd8e72dc32fd006b3f0401f5998fda_220Kate Carnell, wearing her Australian Chamber of Commerce and Industry hat, recently called for budget cuts to what it calls “runaway spending” on the aged pension, family tax benefits and childcare, lest we become an economic basket case like Greece. It contained this little gem:

A key part of the ACCI submission is to review the aged pension and to force retirees who own homes to transform the pension into a loan that would be repaid when the home is sold.

“It seems irrational really for a family home not to be counted when you look at pensioners’ capacity to fund themselves,” Ms Carnell argued.

“For people in multi-million dollar homes that really are keeping those homes for the purpose of I suppose giving them to their children when they die.” (Emphasis added)

While she used the example of “multi-million dollar homes” she did not exclude cheaper homes.

Elsewhere on the net I witnessed an argument proposing that when homes were worth more than a million such a policy should apply. The argument seemed to rest on values. Many people feel that the home is, well, a home, and should be respected as such while people live in it.

I’d say leave the oldies alone while they are alive. Most often they paid taxes and deserve their pension. In any case we should accord them the dignity of the necessities of life when they are too old to work. If they own a home they might need it to buy a place in a nursing home in their last years.

Debt is particularly troubling to many older people, a point opposition spokes person on families Jenny Macklin seemed to understand.

There is a further value position in relation to inheritance. Some feel that the fruits of any individual effort and prudence should be forfeited to the state when we pass on, and the next generation should not benefit in any way.

Last June I looked at changes in pension eligibility and concluded:

    I think that what’s happening here is that if a couple has up to around a million dollars the system will likely strip out all their assets before they shuffle off this mortal coil. At some point above that people can float free and stay clear of the asset-stripping machine. The wealthy have no worries.

I’d suggest that we are tending to polarise into three classes. First we have the true capitalists, to whom all this is irrelevant.

Secondly, we have the well-paid professionals, lawyers, surgeons and such, to whom all this is irrelevant.

The rest of us will end up as the undeserving plebs, who will be stripped bare rather than become a burden on the state.

Actually I’m with Carnell and the ACCI in being more prudent about middle-class welfare. But rather than ripping into the oldies’ homes while they are alive I’d introduce an inheritance tax that cut in at perhaps a million dollars, definitely at two million dollars, .

Home ownership is increasingly difficult to access. I’d suggest that helping the next generation out in this regard is not a crime against society.

3 thoughts on “More asset stripping of the aged”

  1. There are good arguments for “welfare as a loan”. Done well it can allow people to get more support in their time of need while reducing the overall cost of welfare. I am talking about HECs style loans where repayments depend on income and, with qualifications, unpaid loans are a low priority debt on the estate. In some cases it may be appropriate to insist that some assets should be sold to pay off the loan. (Ex: people with numerous investment properties.)
    Done poorly, welfare as a loan can be a nightmare.
    A few qualifications:
    1. Loan must be HECS style.
    2. The loan should not normally have to be paid off if the heir is a spouse, merely transferred.
    3. Care needs to be taken when working out the rules re what happens when a major asset is sold.

  2. Let’s see if I’ve got this right. We oldies have been entrusting successive governments with our compulsory contributions ever since we started working. These governments have then chucked this money – our money – around like drunken sailors buying useless war-toys, erecting monuments to their vanity, giving freebies to their pals and generally squandering it. Now, because of their near-criminal mismanagement, they come around to steal our homes so as to make up the huge deficits they have made for themselves.

    They can get lost. This issue is non-negotiable.

  3. Pretty much Graham.
    All the money we payed in tax is spent, and then some, on us at the time.
    Why ? Coz we elected the Governments that spent it, and we demanded it spent.
    Less than nothing was saved for future generations, yet they must pay for our selfishness for ever due to lost opportunity cost.
    We couldn’t live within our means so they have to suffer.

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