New pension scheme changes could level the playing field for seniors


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New changes to the pension loan scheme could, according to a pension specialist, level the playing field for seniors and provide better access to solutions for pension mortgages.


The government recently announced that it will increase the flexibility and attractiveness of the Pension Loan Scheme (PLS) for senior Australians.

The PLS is a voluntary reverse mortgage loan available to help older Australians looking to increase their retirement income by unlocking equity in their real estate assets.

Through the PLS, people can receive additional, regular, fortnightly payments, with the payments accruing as a debt secured against their Australian property.

From July 1, 2022, the government will introduce a No Negative Equity Guarantee for PLS loans and give people access to a capped advance in the form of a lump sum.

Paul Rogan, CEO of Pensions Boost, said this has been one of the key advocacy reforms that Pension Boost has pushed for, with the new changes to provide key protections for seniors by leveling the playing field for all reverse mortgage solutions. .

“The changes will align the PLS with private sector reverse mortgages. Immediate access to lump sums under the PLS, eligible people will be able to receive a maximum lump sum advance payment equal to 50 percent of the maximum old-age pension,” said Mr Rogan.

The lump sum option will also be introduced and Mr. Rogan noted that singles can access up to $12,385 and couples up to $18,670 through up to two advances in a 12-month period. (Note: This represents 50 percent of the annual percentage of the full retirement pension.)

“This is even more good news, as Pension Boost has been advocating for it, as it will help many seniors cover certain larger expenses, such as paying back credit cards, making home repairs or replacing an outdated car,” he said.

“Further, [it] more will also be invested in raising awareness through better public awareness and branding. We believe that is crucial, as very few seniors know that the government offers this scheme and what it has to offer them.”

Mr. Rogan also welcomed changes to narrowing access and working test. However, he noted that Pension Boost will continue to advocate on behalf of seniors for the PLS rate to be compared to the official RBA rate (or similar) to improve transparency for seniors.

“The PLS rate (currently 4.50 percent per annum) was last revised on January 1, 2020, and the government has approved the three COVID-19 emergency OCR cuts in 2020 (totaling 0.65). [of a percentage point]),” he said.

“Pension Boost also hoped for changes to reverse the phasing out of retirement pensions to increase retirement pension entitlements for seniors, but this too has remained unchanged. The rate phasing changes introduced in January 2017 negatively impacted many retirees, with several industry submissions to rollback being ignored.”

New pension scheme changes could level the playing field for seniors

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Last updated: May 18, 2021

Published: May 18, 2021

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