The Pension Loans Scheme

Barbara is interested in the Pension Loans Scheme but can’t find detailed information on how it will work.


Q. Barbara
Do you know how the new Pension Loans Scheme system, supposedly coming into effect in July, is going to work? I can only access vague information at the moment. Maybe you know more?

A. The Pension Loans Scheme (PLS) allows age pensioners to borrow against the value of their home and not make repayments until the property is sold.

The unpaid interest accrues and compounds over time, and will be taken from the proceeds of the home when sold.

The PLS is similar to a reverse mortgage, but borrowings can only be taken as fortnightly income payments and not as a lump sum.

The proposed changes, which will come into effect on 1 July, include making the scheme available to anyone of pension age, whether they receive the Age Pension or not, and increasing the amount that can be borrowed.

Previously, full-rate age pensioners could not borrow under the scheme, but they will now be able to borrow up to 50 per cent of their annual pension. Higher amounts will apply for part-pensioners and self-funded retirees.

The PLS interest rate is currently 5.25 per cent per annum, which is higher than home mortgage rates but lower than typical reverse mortgage schemes.

Retirees who are looking to top up their income or who are asset rich but cash poor, may be interested in the scheme. But to do so, they must be prepared to dig into the equity in their home.

If you are interested, you should discuss whether this scheme would work for you with a Centrelink Financial Information Services officer.

Related articles:

UK Pension and the Age Pension
Reapplying for widow’s allowance
Living overseas and the pension

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Ben Hocking
Ben Hocking
Ben Hocking is a skilled writer and editor with interests and expertise in politics, government, Centrelink, finance, health, retirement income, superannuation, Wordle and sports.
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