The Turnbull Government is seeking to boost the retirement incomes of asset-rich, cash-poor pensioners by expanding the eligibility of the government’s Pension Loans Scheme.
For the first time, the government’s reverse mortgage scheme will be opened up to full rate pensioners and self-funded retirees from 1 July next year.
The budget measure announced on Tuesday night will also increase the regular income stream available under the scheme from 100 to 150 per cent of the Age Pension.
Under the loans scheme, full-rate pensioners will be able to top up their income by up to $11,799 per year for an individual or $17,787 for couples.
The government said the change would better target the scheme to those who would benefit the most from unlocking the wealth in their homes to improve their standard of living.
The loan, which historically has experienced low take-up, is repaid to the government with interest when the older person dies or sells their home. The current interest rate for the scheme is 5.25 per cent.
Aged care advisor Louise Biti, director of Aged Care Steps, said the scheme could be used to help older people pay for their health and home care costs, for example to purchase private services while waiting for a home care package.
The Pension Loans Scheme can’t be drawn down as a lump sum payment, which makes it unsuitable for paying for residential aged care bonds.
Several industry and consumer advocates in the sector have long been calling for a government-backed home equity release scheme to help consumers pay for residential care.
The Treasurer estimates an expansion of the Pension Loans Scheme will cost the government $11 million over the forward estimates.