A Reassessment of the Interaction of Pillars 1 and 4 in the Australian Retirement System

Abstract

Recently there have been discussions concerning the inclusion of Pillar 4 assets in the assets test for Pillar 1 benefits in the Australian retirement system. This paper considers some examples across different regions of Australia of including Pillar 4 assets above the median home value in the Pillar 1 assets test with the results indicating that for retirees owning homes valued at around 150% of the relevant median home value, the effect would be dramatic with Australian Government net costs from Pillar 2 taxes and Pillar 1 expenditure falling to zero but retirees being forced into poverty. The issue of including Pillar 4 assets in the Pillar 1 assets tests needs careful consideration before implementation.