The federal government has released its new budget for 2013-14, which aims to help support the increasing number of elderly Australians with their living arrangements.
As part of their budget, the federal government has announced that it will be supplying funding of $112.4 million to go to a pilot program to help aged pensioners downsize their homes.
The funding will be released over a four year period, with the new trial program starting on July 1, 2014 and running for three years.
The new program will be available for eligible aged pensioners, or pensioners over the qualifying pension age, who wish to shift into a smaller home without affecting their pension entitlements and retirement income.
This is great news for those who are creating their retirement plan, as it means that they can begin to think about what type of living arrangements would be best suited once they reach preservation age.
Currently, many elderly Australians choose to stay in their own family home as it is not assessed under the pension means testing rule.
However, this can result in elderly people paying high living costs in order to maintain the home and meet household bills. Electricity, maintenance, rates, and other utilities can all easily add up to significant amounts – which can be hard to cope with when living on a fixed income.
The new trial program will allow aged pensioners that have been living in their family home for at least 25 years, to sell it and place the excess sale proceeds into a savings account. This savings account will be established by the government in conjunction with financial institutions, and will allow pensioners to keep up to $200,000 in funds including interest earned.
These pensioners will not need to worry about having increased equity, as the sale proceeds in the savings account will not be assessable under the pension income and assets test for up to ten years, or until a withdrawal has been made.
This new initiative will allow many elderly Australians to have the freedom to shift into a smaller home without worrying about their income entitlements from the government. The federal government has stated that around 30,000 pensioners could benefit from this new program while it is in its trial period.
we can help
If you are thinking about planning retirement, we can help. Why not get in touch by calling 1800 626 881 or by using the ‘contact us’ tool on our website.