Call to expand Pension Loan Scheme

Senate crossbenchers want the government to expand the Pension Loans Scheme.

Call to expand Pension Loan Scheme

Senate crossbenchers are urging the federal government to enable age pensioners to boost their retirement incomes by giving them the ability to borrow against the equity in their homes through an expansion of the Pension Loans Scheme (PLS).

The PLS is a reverse mortgage scheme where retirees can access an income stream by borrowing against their housing equity. Currently, the scheme can only be accessed by part-pensioners or those unable to receive a full pension because of their assets.

Two Australian think tanks, the Australia Institute and Per Capita, have previously suggested expanding the scheme to include full pensioners, and now Independent senators Jacqui Lambie, Glenn Lazarus and Nick Xenophon, along with Motoring Enthusiast Party's (MEP) Ricky Muir are doing likewise, arguing that it’s sensible and fair, and may help to contain expenditure on the pension for the government.

Under the changes proposed in the second Hockey Budget to tighten the asset test threshold, close to 91,000 part-pensioners would lose their benefits, whilst 235,000 others will receive less.

Should they go ahead, extending the PLS will help those who are set to lose the pension under these new budget measures. Expanding the PLS could also help pensioners cover aged care costs and, if the family home is eventually included in the asset threshold test, would mean that they are less likely to have to sell their home in order to fund their retirement.

Read more at www.sbs.com.au

Opinion: Your equity – your right

It can be tough for pensioners to live on the Age Pension alone, so if they have the option of borrowing against their own property in order to subsidise and, consequently, enjoy a higher quality of life in retirement, it should be made available to them. And if the government is looking for ways to make pension spending more sustainable, then how could expanding the Pension Loans Scheme (PLS) to all pensioners be a bad thing?

It’s one challenge to live off the Age Pension alone, but how are age pensioners expected to cover any ‘surprise’ costs that can often arise, such as medical emergencies or illness that requires palliative care or home assistance? The ability to borrow against the equity in their home would help to meet these types of expenses without eating into an income stream that is already being stretched in order to get by day-to-day.

Expanding the PLS to all pensioners could give the government the freedom to cover more bases when it comes to making pension spending more sustainable, and, should the PLS be expanded, the government’s pockets won’t be poorer for it, as the loans involved would be paid upon the eventual sale of the property, or would be paid from deceased estates.

Should the family home one day be included in future assets tests, expanding the PLS would mean that retirees wouldn’t have to move because it would still allow them to access an income stream from the equity in their own homes, rather than from the government.

At the end of the day, if you own your home, then it’s your equity and, coupled with sound financial advice, it should be your decision as to whether or not you wish to borrow against it.

In any case, as long as the debate over making pensions more sustainable continues so, it seems, will the interest in expanding the Pension Loans Scheme.

Do you think the Pension Loans Scheme should be made available to all pensioners? Would you be inclined to borrow against the equity in your home should such a scheme be made available to you? Do you foresee any danger in enabling an expansion of the current scheme?





    COMMENTS

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    Kato
    28th May 2015
    11:01am
    The Politicians should let Pensioners get a ABN to start there own business ie: I do charity work in a couple of towns. I should be able to set that up as a subcontractor. rent a place in the town where I do charity work and claim $270 per night for accommodation only seems fair and reasonable if you go on there thinking. problem solved lots of people off pensions and the jobless rate falls.
    KSS
    28th May 2015
    12:27pm
    Its only in-line with 'their' thinking Kato if the accommodation you rent is owned by your partner or other relative. Otherwise you will be claiming the overnight allowance for something you actually have to pay for! No money in that.....
    Wstaton
    28th May 2015
    10:05pm
    Maybe you can get the $20,000 small business tax concession as well Kato
    LiveItUp
    29th May 2015
    12:19pm
    You forgot the obvious. You need to have a decent taxable income to claim such deductions and being a pensioner this is unlikely.
    bohemian
    28th May 2015
    11:41am
    To use the equity from borrowing against the family home to fund retirement has the potential to encourage people to build up debt instead of preserving it to fund future AGE and Home care. Retirement years can stretch for 25 years and longer and it would be prudent to save as much as possible, rather than go into debt which will lead them to rely back on the pension sooner than otherwise.
    KSS
    28th May 2015
    12:32pm
    That would be good if EVERYONE actually did use their home to fund future aged and home care, unfortunately it seems that is not always the case. Rather many want to leave it to the kids so don't want to actually use the asset for their own benefit as should be the intention. This is where the asset rich, cash poor pensioners sit. The elderly person remaining in their family home, refusing to move even if they can no longer maintain the property, and drawing a pension. An argument for including the family home in the asset test.
    Mike
    28th May 2015
    12:38pm
    After the way Hockey changed the part pension thresholds and wiped out thousands of retirees retirement plans, after they had expert advice, including Centrelinks own FIS officers, how can you ever trust the government not to change the law again. Research has shown that a home owner couple with $325000 and a full pension and concessions, will now be MUCH better of than a homeowner couple with $825000 and no pension. So all those people who worked and saved and put a little bit aside have now been smashed, whilst those who lived their life to the full are now being rewarded. And don't believe Hockey when he calls those wealthy homeowners who have houses worth several million. Most houses and units are well below the million mark, and houses in country areas, and small country towns are often in the $200000 mark How can you now trust the government, HOCKEY CAN NOW CHANGE THE RULES ANYTIME IT SUITS HIM. Anyone who now gets involved in a government reverse mortgage scheme under the present rules, has no guarantee Hockey wont change the rules again when it suits him.
    Sceptic
    28th May 2015
    2:39pm
    Every Government has changed the rules governing Superannuation. The latest changes do not make me happy either Mike, but pleas do not just single out Mr Hockey as if it has never happened before.
    Anonymous
    28th May 2015
    2:40pm
    Agreed, Mike. But what is worst about this is that it's all unnecessary and based on lies. The Aged Pension isn't a budget problem at all! Australia has very low costs for aged pensions - among the lowest in the developed world - and falling rapidly due to compulsory superannuation. We have massive superannuation savings. The budget problem is a result of tax cuts by Howard and Costello, 80% of which went to the very wealthy. Billions could be saved by adjusting superannuation tax concessions to be fair, encourage saving, and assist the lower income earners instead of lining the pockets of the super-rich. But no, take away all incentive to save and punish people who worked hard and sacrificed lifestyle to save for old age. This government is a disgrace!
    Sceptic
    28th May 2015
    2:40pm
    Wasn't the promise not to do anything in this term? No party should ever make a promise that covers for all time, as situations change.
    WAPW
    28th May 2015
    2:42pm
    Mike - I agree with you 100%. One of the Governments pledges pre election was to not change superannuation. This change does impact superannuation and is a change by stealth.
    BUT - what would a Labour Government do??
    Is the family home next??

    It seems that retirees are easy pickings with no real voice and the Government loves to use the words rich retirees when referring to anyone with more than $820,000.
    The changes to the tapering rates have also had a marked impact.
    Anonymous
    28th May 2015
    2:50pm
    Sceptic, no government in my lifetime has attacked aged pensioners in the vile and disgraceful manner this government has. Yes, I'll single out Hockey, because he deserves to be singled out. He has done everything possible to make retirees carry the bulk of the burden for economic problems, ignoring the fact that they already suffered more than any other sector of the community due to falling investment returns. There has been a massive transfer of wealth from retirees with investments to young borrowers. The changes to assets tests are unfair, cruel, socially and economically destructive (because they kill incentives to save for retirement and encourage people to life it up in youth and then put their hands out for pensions), and really an indication of greed and stupidity by the all who support them.
    Sum1
    28th May 2015
    5:45pm
    Bull Shorton's policy on Super is the reintroduction of tax on SUPER INCOME, which was abolished by the Howard government in the 2006 budget. Balance that against the small amount you have lost in your pension..Rainey... having over $823.000 in YOUR SUPER. You haven't just saved for retirement...you have saved to bequeath and your hysterics on this topic have become "vile and disgraceful".
    MacI
    30th May 2015
    9:09am
    This rubbish idea that someone with $823K in Super is worse off than someone on the full pension keeps getting rolled out. It is based on two unreasonable premises:

    1) The return on investment is based on the lowest returns available, i.e. term deposit interest rates.
    2) Retirees should not have to draw down on their capital to fund their retirement.
    Cranky
    28th May 2015
    12:56pm
    Absolutely , An all round resounding "Yes"..I would love the opportunity to borrow against our life investment to purchase a motor home and see Australia before we are too old to do anything else but sit in our expensive pile of bricks and mortar staring out at the landscape through an open window waiting for the last journey....Selfish?...indeed it is and I figure we have earned the right to use our assets as we see fit.
    KSS
    28th May 2015
    1:06pm
    Cranky if you are not on a pension you could do exactly that right now with a reverse mortgage. And you would not be limited to receiving the money as fortnightly payments either so you could indeed buy your motor home and a set of maps by borrowing against your life investment.
    Mike
    28th May 2015
    1:15pm
    Get a reverse mortgage and purchase a motor home and see Australia. , Sounds wonderful,but what happens when one of you gets sick or injured? Some of our friends have ended up in that position, in one case thousands of miles from home and with one partner in hospital, or deceased, and the wife unable to drive the monster. With a reverse mortgage, you soon lose the value in your home and end up with nothing. We looked at it, and decided that we can see Australia more comfortably by either driving and staying at various and much more comfortable accommodation, or even flying to further destinations and staying in a nice comfortable hotel, and we don't lose the value in our own house, or depreciation of the campervan. Whoever came up with this idea is an idiot.
    Brissiegirl
    28th May 2015
    1:37pm
    The best asset the government, and taxpayers can invest in is to encourage people to pay off their homes and live in them for as long as is possible. We are moving into dangerous territory with some advocating that old people get themselves into debt by borrowing against the roof over their head. I suppose most people who think that it's greedy to own a home in old age are the ones who never put in the blood, sweat and tears to pay it off. The ones who lived it up, never thinking that the day might come when the pension would be o.k. if they were not paying rent. Even so, by the time a homeowner pays rates, insurance and maintenance, they are still pushing the barrow uphill. So please get off home-owners' backs, stop trying to gouge them just because they planned for their own accommodation needs or there will be incentive to bother, and that's when the states will find themselves responsible for providing taxpayer funded rental accommodation. Anyway, what's wrong with leaving the kids our homes? Are we supposed to work our backsides off, go without and subsidise everyone who chose differently? What's the difference in me leaving my ordinary house to my kids, and the man next door who got his satisfaction from smokes, booze, travel, regular new cars? Why not penalise him? The entire pension debate is so far from encouraging thrift and sensible lifelong financial decisions that it's now fuelling a new and ugly form of envy-driven entitlement mentality.
    Anonymous
    28th May 2015
    5:14pm
    Spot on Brissiegirl. The government should be encouraging people to save for their old age, and if they leave something to their kids, that relieves the burden on the state to fund the next generation's retirement. The taxpayer has to subsidize the lifestyle of people who spend up big living the good life and have nothing left later. Why penalize people for choosing, instead, to help their children and grandchildren live better? My savings might enable my disabled grandson to live independently. How is it unfair for me to draw a pension because I saved to be able to help him pay his own way, when gamblers and holiday-makers draw pensions because they chose to spend more heavily during their working life?

    The politics of envy and the entitlement mentality are driving very stupid and unfair decisions that, in the long run, are going to prove bad for the country.
    Anonymous
    29th May 2015
    12:29pm
    I don't see what the problem is. If you're earning money, you can get massive tax advantages by pouring your money into superannuation. You get tax breaks coming and going.
    The pension is merely an existence level, no-one I know is "doing well" just living on the pension.
    We will always have people who have no thought for tomorrow, we see that with lotto winners who blow it all in a few years.
    Nothing will change that, except perhaps some more intensive education on retirement planning during the school years. However, even basic education is wasted on some people.
    maelcolium
    28th May 2015
    1:27pm
    What next! What will this achieve?

    So when the pensioner needs to enter aged care there is no asset with which to put down the deposit. Oh, but the government will pay if you can't find the deposit we hear. And how long will that last I wonder.

    Short term thinking as usual from the intellectually challenged senate members. How about proposing some long term solutions rather than these band aid fixes. The simple fact is that the full pension is below the poverty level. What part of this do these twits not get?
    Cranky
    28th May 2015
    1:29pm
    If we all lived in fear all our lives as we age then we would see nothing and do nothing...and most of us do just that trying to jump over the daily task of everyday hurdles...I figure we have nothing to lose if the home depreciates as all our Kids, Grandkids and Great Grandchild will reap all the benefits anyway.. So I try to look past the negativity of "What if"...and live in the hope that we remain as healthy and fit as possible as we travel where we can.So I guess some people would class me as an idiot too...
    KSS
    28th May 2015
    1:31pm
    If the current 'rules' limit the amount of the PLS to the difference between income (including part pension) and the full pension rate, how is this a 'top-up'? and an improvement on the pension? It is limiting all income to the aged pension rate (or whatever pension you may be on e.g. disability) and it is not paid in a lump sum but fortnightly over time.

    That being the case, extending the PLS to full pension recipients will require a change to the maximum borrowing limit rules given applicants would already be receiving the full pension. So where will they draw the new line? $100, $200 more a fortnight? No limit?

    In this case the home amounts to an asset like any other. So why not have the courage to put an end to speculation and include the home in the asset test from the beginning. Then no need to place an arbitrary ceiling on the borrowed amount. The ceiling would be what the property was worth, wherever it was situated.

    I don't understand how Jackie Lamby and Co see this as being a fair deal for pensioners nor quite how this suggestion would result in lower pension expenditure over time. Unless of course if you apply for this you lose the pension!

    28th May 2015
    2:57pm
    If I borrow against my home to its full value, am I then no longer a home owner and thus entitled to a higher pension? Wouldn't the mortgage repayments be ''rent''?

    In past years, the population has respected their elders and recognized their right to an income in retirement, and has happily allocated tax dollars to pay adequate pensions. Why is this government encouraging the young to see us as ''leaners'' and to want to deny retirees a fair reward for 40+ years of hard work to build this nation.

    Stop the rot and just pay the decent pensions we all deserve. The country CAN afford it. Superannuation reserves are massive. Aged pension costs are falling as workers increasingly retire with assets. Huge tax concessions on super for the rich can be cut, saving billions. There is no excuse for attacking retirees.
    Brissiegirl
    28th May 2015
    3:12pm
    If you began work at 15 and retired at 68, you worked 53 years. You probably helped many family members along the way. You paid your taxes, went without to subsidise plenty of no-hopers, illegal immigrants, unmarried/single mothers and their kids. All the young working people I know don't expect a pension at all - as they are planning on their superannuation delivering either a small or large self-funding income on retirement. Small or large - according to their own decisions and expectations.
    Nan Norma
    28th May 2015
    4:43pm
    Well before you know it the governmant will be making it conpulsary for everyone to take out a reverse morgage so they don't have to give you a pension.
    Jilly B
    28th May 2015
    6:54pm
    If you live in your own home for maybe 30 years after retiring at 65 or older then you can still travel for perhaps 10 years and after that you may or may not want to. Many of my friends are now in their late seventies and they cannot fly overseas so they spend their time enjoying their family, garden, doing a little volunteering and there is always reading and taking a course in something that interests you. I look forward to working for as long as I can and then still travelling well into my seventies and then slowing down a little. My brain will still be working well I hope so I will put it to good use and still enjoy life. Reverse mortgages have been tried before and many elderly people got caught but no understanding the T & C and even though they do not have to repay the interest rate was huge and the bank get the first bite of the cherry should you leave it to your child/ren. It is a very bad idea as many people who got caught did not understand what they were doing and relied on financial advisers who are mostly only interested in lining their own pockets.
    Anonymous
    29th May 2015
    12:24pm
    I'd like to think I can still be travelling well into my 80's!
    Look at the number of old veterans still travelling to WW2 reunions!
    My biggest gripe with travelling when older, is the insurance companies really lay into you, as far as travel insurance premiums go!
    The difference in travel insurance premiums for travellers under 65, and for those over 65, is way over the top for mine!
    duneman
    28th May 2015
    9:28pm
    I would like to access the equity in my home to rid myself of debt. I'd rather owe the government than the greedy banks.
    bartpcb
    28th May 2015
    9:54pm
    Instead of beating around the bush and coming up with all these complex schemes, I really don't know why the government and those who believe that older persons are burden on society just come right out and say what they are thinking. If they think we should die earlier and or live in poverty until we die, then say so!!! It's becoming tiresome having to read through all their smoke screens and sales pitches when the thrust of their thinking is so apparent, that being 'Once we've retired, we're no further use to them so we should do the decent thing and die'!!!
    FrankC
    29th May 2015
    11:23am
    Like looking for a real estate agent who is concerned about your money rather than theirs, a rare breed !
    nena
    29th May 2015
    9:28pm
    What a good proposition. If I could get PLS I would be able to continue updating my little unit because at the moment I have run out of finances to keep doing other improvements. Then in that way I would be able to stay at home and live independently until my final days. In that case I would be no burden to the state because if I cannot set my home right for when I get older I would end up in an age- care place. Hopefully the Government is listening...
    bookwyrm
    30th May 2015
    6:56am
    The first nefarious move by Abbott & Co to move towards a system where retirees must use up all the equity in their house to fund their retirement. The house is not safe anymore, the LNP want it!
    MacI
    30th May 2015
    10:20am
    Having looked at the humanservices.gov.au on the face of it, provided that you are of Aged Pension age but do not qualify for the full pension and have enough equity in real estate, you can apply for a PLS to provide a fortnightly payment, tax free, up to the full Aged Pension. The current interest rate is 5.25% which is about 1.25% to 1.5% better than Reverse Mortgage rates offered by some banks and building societies. It seems that you cannot draw a lump sum - only an income stream which apparently is the reason for the low take up rate. Another reason is that it excludes people on the full Age Pension.

    It is interesting that the PLS was introduced by the Hawke government in 1985 when consideration was being given to including the family home in an asset test for the Age Pension. It was to allow pensioners to stay in their own home and draw an income stream equal to the Aged Pension for life or until they downsized to liquidate their assets. The PLS was introduced but the family home was not included in the Asset Test. Interesting and ominous!

    See the following article for an overview of the history of the PLS - http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/FlagPost/2015/February/The_Pension_Loans_Scheme
    Not Senile Yet!
    30th May 2015
    10:42am
    Every cent that paid off a mortgage on any property was TAXED First!!!.......This Government wants to DOUBLE DIP and now wants the taxpayer to borrow against the Asset INSTEAD of collecting an Aged Pension!!!
    In short it wants the EXTREME Right Wing Policy of LOOK AFTER YOURSELF in your old age.....we take no responsibility!!!.....we just take the tax!!
    That is an American .....Privatise Everything.....Policy!!!
    We do not live in America....We are not Americans!!!
    Australians do not have a STUFF YOU I'M ALRIGHT Policy to our fellow citizens.....NOR DO WE WANT ONE!!!
    The diggers that didn't return would be HORRIFIED that our Politicians are trying to copycat the Yankie Policies!!!!
    We are happy to be friends....happy to share their good ideas....but we do not want ALL their Policies taking away our Independent Views on OUR Social Structure within OUR COUNTRY!!!!
    Never heard of a more absurd idea in 50years of working....the Puppets in Canberra need to have their strings cut permanently!!!
    Vote them out....vote ALL the Corrupt Party Puppets out of OUR Parliament!!!
    Replace them with enough independants that No Party can RAM through any more idiotic Policies!!!
    Cranky
    30th May 2015
    2:05pm
    On a completely ridiculous note..Its a shame us old worth nothing to the government any more retired has been, never will be again folk couldn't pool their resources and live in another state not yet formed...Look at the benefit of all the experience among us all..bankers, butchers, builders, decorators, doctors, nurses, surgeons, Gardeners, cooks, cleaners, teachers, and the list is endless ,all existing on a pittance and waiting in armchairs by the telly,and looking out the window until it's eventually time to catch the last bus..We could go back to the food and favour barter system and the old days of loving thy neighbor,and kicking up our heels through lack of stress,..... I know you all think I am barking mad but look at the alternative ...is it any wonder I'm losing it....? and if you respond to this comment............!
    bookwyrm
    1st Jun 2015
    12:24am
    It‘s a great idea, Cranky. I gave 8 years of unpaid highly specialised volunteer work and this is how the government thanks me, always slagging of seniors.