New pension loan scheme changes can level the playing field for seniors

The PLS is a voluntary, reverse mortgage-type loan available to assist older Australians who wish to boost 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 1 July 2022, the government will introduce a No Negative Equity Guarantee for PLS loans and allow people access to a capped advance payment in the form of a lump sum.

Pensions Boost CEO Paul Rogan said this has been one of the major advocacy reforms Pension Boost has been pushing for, with the new changes to provide important protection for seniors by levelling the playing field for all reverse mortgage solutions.

“The changes will bring the PLS in line 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 per cent of the maximum Age Pension,” Mr Rogan said.

The lump-sum option will also be introduced and Mr Rogan noted singles will be able to access up to $12,385 and couples up to $18,670 via up to two advances in any 12-month period. (Note: This represents 50 per cent of the annual rate of the full Age Pension.)

“This is more great news as Pension Boost has been advocating for this, as it will help many seniors meet certain larger expenses like repaying credit cards, undertaking home repairs, or replacing an ageing car,” he said.   

“Further, [it] will also be increased investment in raising awareness through improved public awareness and branding. This is crucial in our view, as very few seniors are aware the government offers this scheme and what it offers them.”

Mr Rogan also welcomed changes to downsizing access and the work test. However, he noted Pension Boost will continue to advocate on behalf of seniors for the PLS interest rate benchmarked to the RBA official cash rate (or similar) to improve transparency for seniors.

“The PLS rate (currently 4.50 per cent p.a.) was last reviewed on 1 January 2020 and the government has not passed on the three COVID-19 emergency OCR reductions during 2020 (totalling 0.65 [of a percentage point]),” he said.

“Pension Boost was also hoping to see amendments to wind back the Age Pension taper rates to increase age pension entitlements for seniors, but this also has remained unchanged. The taper rate changes introduced in January 2017 adversely impacted many age pensioners, with several industry submissions made to wind these back going unheeded.”