Pat has a house but no superannuation and very little retirement income to allow her to spread her wings and enjoy life. She asks personal finance guru Noel Whittaker how she can live a little.
I was born when superannuation was not a word in the dictionary. I worked for 43 years and, in 2001, after many changes in my career, superannuation was introduced for casual teachers. I missed out again, because I retired that year.
I have been subsistence living on an Age Pension ever since. I have a substantial equity in my home and have no one to leave my estate to, so I thought I would try to take out some of the equity to enhance my living – take a holiday, do repairs and so on.
Was I surprised at the results! First, I tried a reverse mortgage. When I did the maths, it turned out not to be a viable proposition (beware people). Then I approached the bank for a loan. It was like getting blood out of a stone, even though I have been in the same bank since 1966 and never faltered in payments. I’ve been offered a loan that will reduce my pension substantially.
Do you have any suggestions for me and pensioners in the same predicament? What is the good of having money tied up in equity when one can hardly afford to live?
A. I think the perfect solution for you is the Pension Loans Scheme, which will be expanded from July. It will enable people like you to draw extra money by way of a government reverse mortgage with a fixed rate of 5.25 per cent and minimal fees. Also, because the drawdowns will be paid to you fortnightly, the compounding effect will be greatly reduced.
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Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature, and readers should seek their own professional advice before making any financial decisions.