Reverse mortgages are becoming more popular with older Australians who are ‘asset rich’ by virtue of the value of their home, yet ‘cash poor’.
Given this trend, it is worth looking into the Australian government’s Pension Loans Scheme (PLS), which has been renovated in recent years to make it more accessible and competitive with commercial offerings.
The PLS, administrated via Centrelink or the Department of Veterans Affairs, has been in operation since 1985 but it remains one of the government’s best-kept secrets.
The scheme is a reverse mortgage style contract where the government provides you with a loan amount each fortnight. The maximum fortnightly payment level is 150 per cent of the full Age Pension less any government pension you receive (self-funded retirees who receive no pension are also eligible).
Refer to the table below for current PLS payment maximums.
The loan is secured against the equity of any property you own in Australia.
Interest is charged on the outstanding loan amount each fortnight (currently the rate is 4.5 per cent p.a. variable compared to commercial provider rates ranging from 4.95 per cent p.a. to 5.60 per cent p.a.).
No loan repayments are necessary, which means the interest compounds over time.
Repayment of the loan is generally required when the property is sold by you, your surviving partner or your estate.
Are you eligible?
To be eligible for the PLS you need to:
- meet Centrelink’s Australian residency requirements;
- be of Age Pension age, which is 66.5 years old (increasing to 67 from 1 July 2023) or older; and
- own the title to any form of real estate property anywhere in Australia.
More enhancements on the way
The 2021 Federal Budget proposed to introduce further enhancements for the PLS coming into effect July 2022, which are expected to materially improve its appeal with seniors. These changes include:
- a lump sum option for up to 50 per cent of the annual full Age Pension rate, currently $12,577 for singles and $18,962 for couples
- a no negative equity guarantee to ensure seniors or their estates are not left with a debt to government if their home is sold for less than the PLS loan.
The government is also proposing to launch PLS education and awareness programs to ensure the PLS is no longer kept a secret.
PLS Payment Levels
| Payment Rates (as at 20 September 2021) | Single Per fortnight | Single Per annum | Couple Per fortnight | Couple Per annum |
| Full Age Pension | $967.50 | $25,155.00 | $1458.60 | $37,923.60 |
| Pension Loan Scheme* | $1451.25 | $37,732.50 | $2187.90 | $56,885.40 |
Examples of maximum Pension Loan Payments for different pension status
| Full Pensioner | $483.75 | $12,577.50 | $729.30 | $18,961.80 |
| Part Pensioner Example: $500 per fortnight per person | $951.25 | $24,732.50 | $1187.90 | $30,885.40 |
| Self-Funded Retirees | $1451.25 | $37,732.50 | $2187.90 | $56,885.40 |
*The Pension Loan Scheme maximum is 150 per cent of the full Age Pension (which includes any Age Pension received).
If you’d like more information on the PLS visit Pension Boost or https://www.servicesaustralia.gov.au/individuals/services/centrelink/pension-loans-scheme
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