The Pension Loans Scheme (PLS) has been a chronically under-utilised service. A 2010 submission from Medicare identified that, despite almost 1 million Australians being eligible to use the (PLS), only 710 loans existed. In the 2018 Federal Budget, the Government announced that it plans to increase the availability of the PLS from July 1, 2019. The Budget proposal would make the PLS available to 1.5 million more age pensioners and establish the PLS a key strategy for retirees.

In a nutshell: At its heart, the PLS is a Government-run reverse mortgage facility. The pensioner uses their Australian property as security for a loan provided by the federal Government. The loan is paid to the pensioner in the form of increased pension payments. Interest is charged on the loan at a rate set by the Government and the loan and interest is usually repaid when the property is sold or the pensioner dies, although it can be repaid earlier.

Eligibility: To qualify for the PLS, a client must:

  1. Be of pension age or be the partner of someone who is pension age,
  2. Be receiving, or qualify for, age, disability support, wife or widow B pension, or the carer payment or bereavement allowance; and
  3. Own Australian property of great enough value to secure the loan.

TIP: Those who would qualify for a payment under one of the means tests (income or assets) but is ruled out by the other means test, meets requirement 2.

Rate of Payment:

The loan amounts under the PLS are paid as an income stream, effectively supplementing the recipient’s fortnightly social security payment. Currently, the PLS payments (cannot) take a recipient’s combined PLS and social security payments above 100% of the maximum amount payable under their social security payment. This maximum amount payable includes any pension supplement, energy supplement and rent assistance for which the recipient is eligible.

In practice:

Those who are entitled to a full pension, allowance or payment already receive 100% of the maximum payment possible. As such, they cannot receive any PLS payments.

This means that the PLS is only available to part-rate payment recipients and those excluded by one of the means tests.

The information contained in this publication is based on the understanding KeyInvest (ABN 74 087 649 474 AFSL No. 240667) has of the relevant Australian legislation as at the date shown in this publication.

The information contained in this publication is of a general nature only and is intended for use by financial advisers and other licensed professionals only. It must not be handed to clients for their keeping nor can any copies of sections of this publication be given to clients. KeyInvest is not a registered tax agent under the Tax Agent Services Act 2009. We recommend that your client be referred to their registered tax agent or legal adviser prior to implementing any recommendations that you may make based on the information contained in this publication.