Pension Loans Scheme
What is the Pension Loans Scheme?
The Pension Loans Scheme is a financial scheme offered by the federal government, allowing Australian pensioners to get a voluntary non-taxable fortnightly loan from Centrelink. You and your partner may use this as your retirement income supplement.
To access the Pension Loans Scheme (also referred to as PLS), you are required to use a property that you own as security. Pensioners can borrow up to 150%, or 1.5 times of the maximum Age Pension, which is paid fortnightly. You may choose the amount of loan proceeds you get each fortnight, although it cannot be paid as a lump sum.
The loan repayments include:
- the loan amount,
- accrued interest, and
- some legal costs.
The interest on the loan will be charged with a current annual interest rate of 4.5%. This rate compounds each fortnight on the outstanding loan balance. As long as the loan is not yet paid in full, the interest will accumulate.
ASAG Reverse Mortgage: An effective alternative to Pension Loans Scheme
Australians by nature are proud homeowners. As such, many of our Australian seniors are owners of at least one home or primary residence where in a lot of cases, most of their wealth is locked away. By releasing this equity, it allows seniors to strategically utilise this equity in their retirement planning. ASAG offers a loan solution allowing seniors to safely access this equity, and leaving them in control of the process. An ASAG Reverse Mortgage can be set up so you can tailor a means of additional income for a pension boost to pay for your retirement expenses without making regular loan repayments and having to sell your home.
As an aide in achieving your financial goals, the funds you’ll receive can be used in various ways, such as:
The choice is yours with an ASAG Reverse Mortgage
You can borrow an amount that will be based on your age, your property’s value, and it’s location.
The total loan amount, including interest, is repayable at the end of the term when you permanently move from your home, sell your property, or pass away.
Though it’s not required, you may choose to make voluntary one-off or regular repayments. You’re free to do so at any time without penalty.
Most Australian seniors value their Age Pension and would prefer to live out their retirement at home. Unlocking some of your home equity can provide funds to supplement your pension and super. Using ASAG Reverse Mortgage can cover various costs that range from day-to-day expenses to aged care.
Frequently Asked Questions
Meet these specific requirements to access the Pension Loans Scheme:
- You or your partner is in Age Pension age or over.
- You’re eligible to get a qualifying pension.
- You or your partner owns a property in Australia that can be used as security for the loan.
- You have appropriate and adequate insurance covering the property.
- You are not subject to a personal insolvency agreement or bankruptcy.
You’ll have to agree to the PLS’s terms and conditions to get the loan. Your partner also have to agree about your application for PLS. They have to agree and sign within the application, stating they understand the terms and conditions.
You can get a loan even if your assets and income wouldn’t normally allow you to get one of the qualifying pensions.
The loan payments you can get fortnightly under the Pension Loans Scheme will be based on how much pension you receive. Your combined pension and loan cannot be more than 150% of your maximum pension rate.
In the event your pension changes, your loan payments also adjust. This setting prevents the loan payments to go over 150% of your pension rate or the payment rate of your choice.
If you don’t receive a pension, you’re allowed to get a maximum amount of PLS as a loan payment. You can get loan payments until the total loan balance (including costs and interest) reaches the maximum loan amount.
You can also ask Centrelink to stop your loan payments at any time.
You can make repayments at any time, although you don’t have to. Instead, you can wait and pay it in full when the property is sold.
Partial costs of the loan are worked out based on the type and number of properties you used as security. For example, if one property is used as security for the loan, you’ll have 1 set of costs. If 2 properties are used as security, you’ll have 2 sets of costs.