How the Pension Loan Scheme works to top up your pay

Font Size:

Part age pensioners or people who do not receive any income support pension because of the income or assets test are able to borrow instalments from the Government, under the Pension Loans Scheme (PLS).

The fortnightly payments are a top up to the level of a full Age Pension and any combined payments cannot be greater than a full Age Pension. If you already receive the maximum Age Pension, you are not eligible to apply for the PLS.

Known as a reverse equity mortgage, the loan is non-taxable and the term of the loan can be for a short time or an indefinite period. In order to borrow, a pensioner must use their home or other property as security.

A pensioner cannot borrow more than the worth of their house. That is, they cannot leave a debt behind for someone else to pay.

While the loans will be secured against a pensioner’s home, the amounts borrowed do not have to be paid back until the property is sold. However, if a recipient’s circumstances change, they may have to pay the loan back sooner.

The borrowings cannot be a lump sum as funds must be paid with the fortnightly pension. Any costs associated with setting up the loan must be paid by the applicant. An interest rate of 5.25 per cent will be charged. This is one percentage point cheaper than reverse mortgages on the market and considerably less than the lowest interest rate for a personal loan of 7.65 per cent, according to comparison site Canstar.

To be eligible for a PLS loan, you need to meet the following criteria:

  • receive less than the maximum rate of income support pension or no pension, but be notionally assessed under either the income or assets tests at a rate greater than nil
  • be of Age Pension age
  • if you are part of a couple, your partner must receive a rate of payment that is less than the maximum amount or nothing due to either the income or assets test, but not both
  • have sufficient property in Australia that you can offer as security for the loan.

In this year’s Federal Budget 2018, the Government extended the scope of the Pension Loans Scheme (PLS) so that more older Australians would become eligible to borrow through it.

From 1 July next year, Australians of retirement age will be able to top up their entitlements, whether or not they are part or full pension recipients or self-funded retirees.

For more information, visit the Department of Human Services.

Would you consider taking out a pension loan to top up your payments? Would you prefer to continue living frugally so that you can pass on a debt-free home to your children? Do you think that the Federal Government should play the mortgage market this way?

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 the 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 financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Join YourLifeChoices today
and get this free eBook!

Join
By joining YourLifeChoices you consent that you have read and agree to our Terms & Conditions and Privacy Policy

RELATED LINKS

Cashing in on your property: the pros and cons

You don't have to choose between a roof over your head or the cash.

Does using your home to finance retirement make sense?

When is using the cash tied up in your home to fund retirement a sensible idea?

An alternative to reverse mortgages

Following on from our reverse mortgage article last week, subscriber Chris has suggested Centrelink's

Written by Olga Galacho

88 Comments

Total Comments: 88
  1. 0
    0

    I can foresee another financial mess in the making for both the government and the individuals taking out such loans
    And a waste of taxpayer money to administer

  2. 0
    0

    Reverse mortgage Olga? You should be ashamed of yourself trying to flog this bad product to retirees. The government may see this as desirable but then the government is all about AVOIDING paying Australians with any assets a pension and getting them to live off now the family home and leave their children and grandchildren nothing.
    There is an election coming and I hope that even the mentally challenged amongst us will remember the many lies, deceit and movement of money into the bank account of the rich….who have zero need of government handouts.
    My advice to anybody thinking about taking up such an offer is AVOID IT. You’ll be sorry. If not you your children certainly will.

    • 0
      0

      This is a labor scheme Mick
      Another one of their silly ideas
      You know the ones, right next to removing universal pension and raising pension age to 70

    • 0
      0

      There are most probably a few post codes where that scheme is available like is the case with commercial reverse mortgages. So people in Sydney, Melbourne and Brisbane’s more salubrious locations can apply. Try getting one in Dubbo.

    • 0
      0

      I am unaware who invented it. All I know is that the current crop are flogging it and the reason is as plain as the nose on your face. One only has to look at the ferocity at which this government has come after retirees to see the intent. Disgraceful.

    • 0
      0

      Yes, not sure why this disgusting scheme is AGAIN being promoted, when it is known to be a BAD idea, as most seem to agree here.

      Also, yes, BOTH Labor and Liberal act as a Tag Team – with one introducing an attack on retirees and the other extending it!
      In this case, it is particularly disgusting as the Libs cut pensions by revising the Assets Test in Jan 2017, and now want to profit from the same people they attacked!!!

    • 0
      0

      MICK, it’s interesting how you are so quick to condemn the government about the PLS but when you are advised that Labor thought of it, you plead ignorance but still continue to rubbish the government for trying to make it more available to pensioners.

      “The PLS was first established in 1985 when the Hawke Government re-introduced an assets test for the Age Pension, and other pensions. Take-up of the scheme has always been limited, despite the Keating Government broadening eligibility in 1996.”

      It seems that as the election date gets closer, MICK, that you have amped up the pro-Labor rhetoric. Are you a script writer for Labor or do you have access to one? This bit, stated without any proof, is what can be heard any day that Question Time is broadcast: “the many lies, deceit and movement of money into the bank account of the rich….who have zero need of government handouts.”

    • 0
      0

      I am being 100% honest OM. I don’t know whose brain child this policy was and no matter which side of politics it came from I will condemn it.
      The rest of your post is the normal right wing tool of accusing others of what you do. Your government does this all the time. Not too long ago they went Labor about waging a ‘class war’ when the policies of this lot are what class wars are made of.
      The fact that you start writing this sort of BS is an indication to me that an election is not too far away. The media is already starting to groom the government and restricting and editing Labor comment. Watch 7 or 9 News and then flip over to SBS and ABC to see the same topic with a real comment from Labor. Puts a totally different spin on it.

      For the record accuse all you like. I don’t write anything for Labor but will be doing my utmost to ensure that the worst and most dangerous government to democracy in my lifetime is sent out of office in a big way. I have to feel sorry for you as there was a time I considered you are fair and thinking person rather than a tool of this government.

    • 0
      0

      Thanks MICK, you have just confirmed my accusation. A typical Labor response where the question of proof of a comment has been totally ignored and, instead, attack the person who asked for the proof. You claim not to write anything for Labor yet you ask all and sundry to get rid of this government. Blind Freddy can see that the only other alternative to this government is Labor.

      As I have stated here on numerous occasions, all I ask for is the proof to back up ridiculous comments. If that makes me a supporter of a particular side then so be it. What I don’t do is go onto personal attacks or name calling or advocating anyone votes for a particular party. I get annoyed with people who tell lies.

    • 0
      0

      Actually you constantly demand proof whilst rarely providing any on your own statements. When proof is given you do not respond.
      The only thing confirmed is that you are pushing the right wing agenda and ramping up with an election coming. Always the same. Watch 7 or 9 News in the last 4 weeks of the election campaign and you’ll get me gist….as if you are not aware of how the media works at election time.
      As always we’ll have to agree to disagree.

  3. 0
    0

    Downsizers be aware that if you downsize to a retirement village where you don’t have title to the land your unit sits on, you can’t use that home as security against the loan.
    Downsize to a more expensive home, that gets rid of some your wealth into a non assessed asset. Putting spare money from downsizing into super increases your assets.

    • 0
      0

      Better still don’t downsize at all. This is a trap for the mentally challenged. Once caught those who partake will spend their money and be wailing about poverty. Guaranteed.

    • 0
      0

      That is so true MICK. Downsizing doesn’t save very much and it may very mean the loss of a part pension.
      Body corporate fees are huge of course if they intend to live in a fancy more expensive unit with all the bells and whistles – then go for it.

    • 0
      0

      The party only lasts for a short time and if inflation again kicks in there goes the money as outgoings rise.
      Reverse mortgages may have been flogged on TV but people need to think long term rather than next week. Sadly many of us cannot do that.

  4. 0
    0

    Would have to agree Mick,where did that other fool come from.

  5. 0
    0

    Yet more evidence of the utter STUPIDITY of the IDIOTS making policy! Take a loan at over 5% to achieve an adequate income, and leave your heirs only a portion of your home, or UPSIZE and get a higher pension with no repayment liability and no worry about how much of your children’s inheritance the government will steal. Which would you choose?

    Honestly, only a blithering IDIOT would borrow when the income increase can be so easily secured by simply upsizing to a more expensive home, with no worries about loan security or interest costs! A

    Why are these MORONS in power being paid so well to make such DUMB policy decisions, when anyone with half a brain and two ounces of common sense can see the simple and obvious solutions, and anyone with half a brain can readily see how to manipulate the system to their own unfair advantage?

    • 0
      0

      On the other hand, alarm bells should be sounding loudly. Why would the government be looking at ways to ensure retirees have adequate income unless it was totally committed to slashing pensions further? Wait for it, friends. It’s coming – and Mick, don’t fool yourself into thinking Labor will do anything different. Both parties are pursuing the same selfish objectives – transferring wealth to the rich and progressing social engineering to grind the middle and lower classes into increasing hardship and subservience.

    • 0
      0

      It’s a trap OGR. More money taken out of the pension = more money available to hand out to the wealthy who have no need of it other than their own greed. That is what the current government is doing and only the idiots amongst us, few hopefully, would be taken in by the feel good rhetoric.
      As the old saying goes ‘a fool and his money are quickly parted’.

    • 0
      0

      Oh for heavens sake stop the scaremongering
      This scheme is for those who are not on a full pension or no pension at all
      If you want extra income – this is an option
      You don’t need to access it

    • 0
      0

      Has anyone noticed that Old Geezer has disappeared and olbaid taken over the “soap box” ?

    • 0
      0

      Yeah HS. I have asked YLC to stop posters changing names before but to no avail.
      You are likely right about olbaid. Not the only one of course.

    • 0
      0

      Old Geezer is on a fully self funded cruise which is no doubt also filled with mainly OAP’s on full pension spending their savings

    • 0
      0

      BS! How would you know that. HS has it right.

    • 0
      0

      Also noticed that olbaid peddles the same LNP propaganda as Old Geezer did? Coincidence?

      Yes Mick. How would he know – unless he IS OG.

    • 0
      0

      Olbaid, whether or not one has to avail themselves of the scheme is irrelevant. It is yet more evidence of government incompetence and STUPID policy. The OAP system is hopelessly inefficient, uneconomical and inequitable. We don’t need yet another STUPID policy to try to excuse the mess. We need the system FIXED by people with INTELLIGENCE AND COMMON SENSE. Sensible Australians will continue to lobby for sensible reform. Only self-opinionated/self-interested fools endorse or excuse policies that are harmful to the nation.

  6. 0
    0

    Better to be debt free of t any government loans /Learn to be frugal and live within your means Government will still take out what is legally their money.

  7. 0
    0

    Pity we can’t get 5.25% interest on our savings at the bank. As usual this scheme is daylight robbery.

  8. 0
    0

    If the Aged Pension is Well Fare as no one has contributed into a pension fund, a L.N.P. Cabinet members view, What would you call this, If the unions should not be running Superannuation should the Government be lending money?, should not the Finance industries be doing this?

    • 0
      0

      Private Finance is already doing this but only for selected post codes, just have a look at the explanation of the offers. On top of all that you are obliged to keep the place in good repair and you will have inspections like as if you were a tenant. Stupid, should not even be considered by anyone.

    • 0
      0

      john no – is that you recycled heemsjerk?

  9. 0
    0

    No. Reverse mortgage is not a good idea. It can leave spouses homeless, children with no inheritance. They probably would have been better off just helping out their parents when they needed financial assistance.

    Inheritance helps take away the financial burden on the welfare system and is often the saviour of women who have ended up at days end will very little.

    I would however like one of those little houses you have in the photograph!

    • 0
      0

      Agree Rosret but people these days have become self obsessed. You see it on Facebook and you hear it in the media. So leaving nix for the next generation does not come up. What a bunch many of us have become. Makes me ashamed to admit I am a boomer some days.

  10. 0
    0

    You know Mick, the rest of us are so lucky that we have access to your insightfulness, wisdom, and ability for seeing all life’s problems as manifestations of the evils of the conservatives! God bless you, old son – the rest of us are so indebted!

    • 0
      0

      Conceited little snot aren’t you Small Al. Go do your dirty work and good luck to you. Maybe tell readers who is paying your bills.

    • 0
      0

      Go ahead Mick, apply the smear – you Lefties are so good at that! Just like your beloved Juliar – call a bloke with a wife, 3 daughters and female chief of staff a misogynist – never mind the total inaccuracy of the label, as long as you get the smear right! And you call me ‘Small”!!

    • 0
      0

      Smear? Ever watched Turnbull talking? Accusations against Shorten. That is both hatred and smear on steroids.
      Look up Emma Hussar. Read about her supposed crime. Then look at Darryn McGuire.
      Compare the two and tell me who got the airtime leading up to Super Saturday? Yes….Hussar almost every night whilst McGuire got 2 nights? Who had the real sin against the country????
      Obvious dear Watson. Spin it as you like but the facts are the facts.

    • 0
      0

      What an odious little man that MICK is.

Load More Comments

FACEBOOK COMMENTS



SPONSORED LINKS

continue reading

Health

Mozzies biting? Here's how to choose a repellent - and how to use it

Mozzies biting? Here's how to choose a repellent (and how to use it for the best protection) Shutterstock Cameron Webb,...

Entertainment

Sir Bob Geldof on grief, fame and getting through it all

I've hardly started questioning Sir Bob Geldof before he is off on a long, sweary rant about everything he thinks...

Australia

Abandon Australia Day and choose the history we want to celebrate?

Australia Day is the anniversary of the arrival of the First Fleet in Australia. On 26 January 1788, 11 convict...

Community

Speaking up for the disappearing art of listening

Columnist Peter Leith is 91 and describes himself as "half-deaf and half-blind". But he sees and hears a lot and...

Beauty

Hyperpigmentation: How to tackle those tricky dark patches on your ski

There are plenty of great things about summer - sunshine, picnics and fruity cocktails immediately spring to mind - but...

Australia

Enthralling, dystopian, sublime: NGV Triennial has a huge 'wow' factor

Refik Anadol: Quantum memories 2020 (render) custom software, quantum computing, generative algorithm with artificial intelligence (AI), real time digital animation...

Australia

Where to eat, drink and play on Kangaroo Island

Australia's third largest island is an oasis of pristine wilderness, premium produce and hidden secrets ripe for discovery. Easily accessible...

COVID-19

Will you need a vaccination to visit Australian venues?

State premiers have suggested that once vaccinations begin in Australia, those without vaccinations may be banned from visiting some venues...

LOADING MORE ARTICLE...