Many older Australian households asset rich, income poor

Asset rich but income poor is the story for nearly one-third of older Australians in low income households, according to new figures released by the Australian Bureau of Statistics (ABS).

 

ABS' Program Manager of Labour and Income Branch, Jacqui Jones said, in 2013-14 (Survey of Income and Housing), 54 per cent of older low income households had wealth in the top 40 per cent of Australian households, where wealth is the value of a household's assets less the value of its liabilities.

 

In 2013-14, low income households equated to those with a disposable household income $205 to $511 per week.

 

Older households are considered to be couples and lone persons with a household reference person 65 years and over.

 

"While many older low income households have liquid assets such as bank accounts and shares available to them, there was large variation in the amounts available; one-third had over $50,000 worth of liquid assets in contrast to one-third of older low income households who had less than $5,000 in these sorts of cash assets," Ms Jones said.

 

Housing costs have a large impact on low income households, with the average cost of housing for older low income households at $106 per week.

 

Three-quarters (74 per cent) of older low income households owned their home outright and eight per cent were renting.

 

In contrast, 19 per cent of younger low income households had wealth in the top 40 per cent of Australian households.

 

“Half of all younger low income households have less than $1,000 in liquid assets and two-thirds of younger low income households had liquid assets of $5,000 or less,” said Ms Jones.

 

The average cost of housing for younger low income households (those with a household reference person aged less than 65 years) was $216 per week.

 

Almost one-fifth (18 per cent) of younger low income households owned their home outright and two-thirds either had a mortgage or were privately renting.

 

The Property Council Executive Director - Retirement Mary Wood said, A typical older Australian will have $600,000 in property assets but will be living day-to day on a fixed income”.

 

We need to put in place the right policies that help older Australians downsize. All too often, a pensioner considers downsizing only to reject it because it would mean a hit on their pension.

 

Many older Australians have a desire to move to more age appropriate accommodation, like a retirement village apartment or villa, but will be hit with a reduction in their income despite owning exactly the same amount of assets if they make the move.

 

The reasons for downsizing are often health related – wanting homes without steps, or big backyards to maintain, and lower rates and utility costs.

 

It makes little sense, both from an economic and a health and wellbeing perspective, to trap older people in large and often unsuitable family homes, with little money available to spend.

 

The Property Council is proposing an adjustment be made to the means test, to exempt some proceeds from the sale of the family home by full-rate age pensioners aged over 75. The cost to the Budget is minimal.

 

This type of targeted reform that removes the current disincentive to downsize will benefit income poor pensioners, as well as make the pension system fairer and more sustainable.”

 

More information is available in the ABS feature article, Wealth of Low Income Households, available for free download from the ABS website (www.abs.gov.au).

 

30 March 2016