Rowan Ramsey (Grey, Liberal Party) Share this | Hansard source

I rise to speak on the Social Services and Other Legislation Amendment (Pension Loans Scheme Enhancements) Bill 2021. I totally reject the amendment put forward by the previous member, which frames the government as having failed badly on pensioners and older people in Australia. I reject that entirely, but I think this bill is a good move. It addresses some of those great problems, those conundrums, that people and the nation have to manage. How we fund the retirement of people in Australia at the kinds of levels that they would like to have their retirement funded at is a challenge for them and a challenge for us.

Age pensions were established in Australia at the beginning of the last century, in about 1909. At that time, when life expectancy was about 50, it was for people who reached the ripe old age of 65, so there weren't actually all that many people who went on the age pension back in 1910. If you survived that long, then you claimed your pension. Today, of course, the pension is available from the age of 66½ heading to 67. I note the comments of the previous member about the coalition trying to extend that to the age of 70. But it was, of course, the Labor Party that extended it from 65 to 67. But it is what it is, and I don't think that's a bad age.

Life expectancy is now 82.9, almost 83, years which leaves a gap of around 16 years in which people may draw an age pension, and that is the challenge that is facing the nation. It has been addressed over the long term by investment in superannuation, but I think Australians would be surprised to learn that, of that cohort of people in excess of 65 years old who are in the bracket of being eligible for the age pension, only 62 per cent actually draw on it. That would probably be surprising to most Australians. I'm sure you, Madam Deputy Speaker Vamvakinou, have gone into an office and people have asked what your pension number is as they assume everybody is on the pension. That is far from the case. If 62 per cent are drawing their age pension, it stands to reason that around 38 per cent are not, and I think this is the great success of the policies of a number of governments. Compulsory superannuation was brought in by a Labor government under Paul Keating—I think he was the Treasurer at the time, in fact—at a rate of four per cent. It increased to nine per cent in 2002 under a different government and now it's drawing its way northward again, and the current rate is 10 per cent and that is happening under a Liberal government, a coalition government. So there is broad support across the political parties for the notion of compulsory superannuation.

It's worth noting that there has also been an explosion in the net wealth of older Australians making voluntary contributions through superannuation. I'm sometimes put upon by senior Australian saying, 'Well, what are you doing for independently funded retirees?' What we do for independently funded retirees is set up this amazing system where the taxpayer subsidises your contributions into superannuation, whether that be done in the compulsory manner or voluntary. The 15 per cent flat tax gives the means for senior Australians to actually set up their financial affairs as they head towards retirement in a situation where they pay no tax. That has been subsidised by the taxpayer.

I'm certainly not decrying that, but I think people should understand that's how this very generous scheme by world standards has come about. It's led to that drop off in the number of people drawing on the age pension in their older years, which is, of course, the safety net. That safety net is designed to give a good standard of living, not a luxurious one by any means but a reasonable standard of living. An interesting way that the age pension is set is that it is not set by any one indicator; it is set by whichever is the highest between the CPI or the aged-sector expenditure barrel or a percentage of average weekly take-home male earnings. That means, on any one of those criteria it rises faster than the other two. So it is a generous scheme in world context, and, as I say, it provides a good standard of living but not a magnificent one, which is where this legislation and the personal loan against the family home scheme sits in place. We should celebrate what we've done.

At the moment, the pension stands, with the supplementary payments pension, for singles at $967 a fortnight and for couples at $729 each or a combination of $1,458 a fortnight. So I think we can safely assume that's the lowest rate of pay for people who are over that age of 66½ at the moment. The pension is brought down on a sliding scale according to your assets and income, assuming you are earning an income from your assets. That's the base rate. But, of course, the family home in Australia is not included in the assets test, and 80 per cent of Australians over the age of 65 own their own home. Again, this is a tremendous achievement in the world scale. In Australia it is still one of the things that we aspire to—to own our own home. Successive governments have recognised that that is a separate investment to everything else that that particular person can lay their hands on. So the family home is not included in the assets test.

But in the last 10 years—in fact, in the last 20, 30 or 40 years or any time frame you'd like to look at—there has been a spectacular increase in the value of the family home. Over the last 10 years, it's perhaps been as much as $200,000 or $300,000 or $500,000. In Sydney, the median value of a Sydney residence is $1.3 million. It would stand to reason that if your major asset is outside the pension requirements you should be able to utilise in some way that great increase you have had in your wealth by taking a risk at a younger age, saying, 'I will take on this debt, I will take on the challenge and I will pay off the family home.' Rather than having to spend a modest retirement, perhaps they might elect to spend a better financed retirement and get a little bit more in their latter years.

The obvious way into this is a reverse mortgage. They are available in the commercial market. But for many it's a pretty new concept. With a family home that they've scraped and saved for all their lives and consider to be sacrosanct, they venture into the commercial market with the mentality, 'I have worked for and paid for my house; why would I put it at risk?' It is of concern to them that somehow the market might turn against them and they might end up losing their family home or they might end up losing the value of the family home because they've drawn down on it in their retirement. It's a fairly unlikely outcome given the track record of real estate in Australia, but you can understand why it is a real concern for these people.

So government stepped into that space some years ago and provided the Pension Loans Scheme, where, rather than taking your loan out against the bank you take it out from the federal government. It's breaking the ice in this area. But this amendment actually eliminates that fairly remote possibility that the owner may overdraw the value of their property, resulting in they or their estates actually owing a debt to the Commonwealth. I don't think it will be a game-changer, but I think it is sensible legislation and it carries, I think, minimal risk for the Commonwealth and the taxpayer. This is to get more people to recognise that this is part of their wealth that they generated during their life and that there's no particular reason to leave it entirely intact for a second generation. Of course we would all like to leave our children a good start in life, but it is not incumbent upon the current taxpayer that they be funding somebody in the future. So it's a choice they can make. It's not compulsory. This should make it a little more friendly. The no-negative-equity guarantee will provide peace of mind to retirees that, whatever happens, they will not accumulate debt in this scheme.

This amendment also allows for a lump sum in advance twice a year. They can access, in total, for the year, up to 50 per cent of the current maximum rate of the pension back against that reverse mortgage, that offset against the family home. In the case of a single person, that would be $12,580 and, in the case of a couple, it would be $18,960 to supplement their pension. For a couple, that would put them in excess of $50,000, which is a pretty tidy income. My view is that, if you have that kind of income, why wouldn't you use it to enjoy your retirement years? So I absolutely commend the legislation and the minister for putting it forward, and I commend the bill to the House.

See this speech in context