Centrelink Q&A: How does the Pension Loans Scheme work?

Barbara is interested in the Pension Loans Scheme but doesn’t know the details.

Centrelink Q&A: How does the Pension Loans Scheme work?

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.

Are you eligible for an Age Pension? Do you know your rights? The PensionChecker™ tool has all the information you need.


    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.


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    3rd May 2019
    Fantastic to borrow off your home and comes out after one dies to be able to pay loan back.................But would like to know more about
    3rd May 2019
    You can't borrow a lump sum though, just fortnightly payments, interest rate is 5.25%
    4th May 2019
    Its compound interest, and neither is it fixed so there might not be much left when sold. Also, if you save it up for large repairs/capital items, the money will be deemed by Centrelink until it’s spent. I’d check what happens if you have to go into Aged Care.

    4th May 2019
    I'd have to be desperate to fall for that one. Cannot really understand the children not helping out with some cash when they are left the property, especially since we haven't got inheritance taxes (death duties) as yet. Pretty sure though they are coming.
    4th May 2019
    If there is a debt left when going into Age care it will reduce your assets for the means tested fee etc.
    Karl Marx
    4th May 2019
    With an interest rate of 5.25% & not fixed so can go up (but never down) the government is turning this into a business & running for a profit.
    The interest rate should be a maximum of the inflation rate which is currently 1.80-1.90%
    5.25% is even higher than the deeming rate of a max 3.25%
    4th May 2019
    Thanks for putting that up, mate. The deeming rate is a joke at any time. I am offered 2.5% for a year this month.