THE VOICE readers and CPSA Members are concerned about the Productivity Commission’s reverse mortgage proposals.
And they should be.
But this has led to some Members questioning whether they should transfer their home to their children now in order to avoid it.Let’s look at what can happen if you do just that.
At present, compulsory reverse mortgages are a recommendation and so the best course of action is to continue campaigning against it with your local Federal Member of Parliament so that it does not become Government policy.
CPSA has had a number of calls about whether pensioners would be better off if they transferred their homes to their children at a discounted price now, in order to avoid reverse mortgaging their home for $60,000 if they require aged care. The answer for most people is, largely, no.
Centrelink only allows pensioners to gift $10,000 in cash or assets in a year, up to $30,000 over a five-year period.
If a home is sold at a discounted price, the difference between that price and its market value will be considered the gift.
So you’ll be likely to lose your pension.
Any amount gifted will continue to be considered an asset for another five years and will also have deeming rates applied to it.
Deeming assumes your financial investments are earning a certain rate of income, no matter what income they are actually earning.
Currently, the deeming rates are 3% p.a. for the first $43,200 (singles) or $72,000 (couples) and 4.5% p.a. for any amount above these figures.
Other issues to consider are that there may be circumstances in the future which may not seem likely now. And it is not just about trusting your children.
While not intentional, bad investments can lead to houses being claimed. There are myriad ways in which financial trouble could develop, and you would no longer have control over your home.
Home ownership is a key safety measure against housing insecurity.
Older people, and older women in particular, are now the fastest growing group of homeless people in Australia, so it is important that people hang onto their housing security.
So it’s probably best to hold onto your home – both for financial reasons and for peace of mind.