Pensioners could tap into their housing wealth to boost income
Recent census results highlight that Ireland is getting older.
The combined effect of improvements in health and reductions in emigration have fuelled the growth of a larger and older population.
While this is great news, reflecting progress at so many levels in recent decades, it comes with some challenges, such as questions around the ability of future generations of pensioners to afford a decent standard of living in later years.
At a meeting of the Citizens' Assembly, I highlighted the potential for current and future pensioners to tap into their wealth as a means of boosting retirement income. Data from the CSO shows that pensioner households possess almost one-third of all the household wealth in the State. The middle such household has a net wealth of €200,000; some have a lot more and some a lot less. Unsurprisingly, most of this wealth is in the form of housing. For the most part, the current situation is that people save through their life to pay for this asset and die leaving it behind.
I suggested it should be possible to design a simple, State-provided (not private-provided) means of accessing a small proportion of this capital value in older age. For example, accessing €5,000 to €10,000 per annum from the age of 70 years and upwards would relieve the financial strain of many households. The funds could be recouped by the State from the estate of the individual and the entitlement of the State to these funds could be structured in the same way as the Fair Deal scheme currently works.
This would be a win-win. Many pensioners would enjoy better living standards, although they would die a bit less wealthy (so what), and there would be a reduction in the challenges families and the State face financially supporting older people.
The old-age pension currently provides most pensioners with most of their income. That is unlikely to change in the decades to come. However, for those lucky enough to own their home, there is merit in being able to access some of their wealth to support living standards in later years.