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Budget: Treasurer expands government’s reverse mortgage scheme to full pensioners


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.

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16 Responses to Budget: Treasurer expands government’s reverse mortgage scheme to full pensioners

  1. Peter Stewart May 11, 2018 at 8:42 am #

    The Pension Loan Scheme expansion is good for improving the cash flow of older Australians but has none of the consumers protections afforded to borrowers in the Reverse Mortgage market.
    The biggest negative is the lack of a lump sum component, which is included in 96% of current reverse mortgage applications.
    It also does not include an aged carer loan, which is available at an interest rate of 5.6% and charged lower then the rate of the Daily Accommodation Payment (5.77%)

  2. graham hockey May 13, 2018 at 8:16 am #

    Is this available to part pensioners?

  3. Cliff Giddings May 13, 2018 at 9:58 am #

    Inability to draw down a lump sum makes this plan relatively unattractive as an option for my situation.

  4. Ian Macadam May 13, 2018 at 2:26 pm #

    I am on the aged pension I am interested in getting a loan for some bathroom renovation’s, and some minor house repairs, and if permitted a car upgrade, I own the house I live in. would this scheme help me?

  5. Louise Biti May 19, 2018 at 4:59 pm #

    Yes Graham, this scheme is available to part-pensioners.

    Part-pensioners will be able to borrow up to the pension limit allowed (currently 100% of relevant pension including supplements and proposed to increase to 150% from 1 July 2019) less the part-pension received. So for example, if the full pension was $900 per fortnight, a part-pensioner who receives $400 per fortnight age pension could borrow another $500 per fortnight under current rules. If the proposals are implemented, from 1 July 2019 on these numbers, this person could increase the maximum that can be borrowed to $950 (ie $150% x $900 – $400).

    The scheme can also be used by self-funded retirees who are at least age pension age (some limitations currently). The current scheme can’t be used by full age pensioners, but this will be opened up from 1 July 2019 if proposals are passed.

    I agree with comments that biggest limitation is no lump sums. The limits on income drawings may be lower than in commercial products. So it is important to consider whether you need income or lump sums.

    The Pension Loans Scheme will not suit everyone needing to access the equity in their home but it opens up a wider range of choices. It can be used by people who are entering aged care (who need extra income) as the loan only needs to be repaid when the house is sold or the last member of the couple (owner) passes away.

  6. Diana Parsons May 22, 2018 at 9:35 am #

    Hi, I own my home but live in a retirement village where I don’t own the land. An extra few thousand a year would help me enormously. Would I now be eligible for this loan? Please say yes!! The only other alternative for me would be to sell my home and go in to rental!!

  7. anthony dorhauer May 25, 2018 at 8:33 am #

    Will it be available if I have a mortgage on the property?

  8. Alice Smith June 1, 2018 at 3:50 am #

    I own my home but finding it very difficult to make ends meet living on a single pension from DVA. I don’t have gold card just the the same as most Aged Pensions.
    To be able to access equity from my home, would make life much easier for me. It would enable me to get new dentures I need plus other things need updating, fridge etc.and I have had a lot of medical problems since my husband died in September 2016 and he was in Nursing Home care for 15 months before he died, all of which has played havoc with my savings
    I would like to find out and understand much more about the proposal eg. what happens if there is a change of government and why such a wait for it to start. Many of us could go under before July 2019.

  9. Anonymous June 20, 2018 at 10:21 pm #

    Its ridiculous they probably wont be in power next year, its flim flam. Why cant they introduce it July 1st this year.

  10. patti July 14, 2018 at 9:42 am #

    Yes I agree could we have the Pension Loans scheme implemented before next election

  11. Kim July 22, 2018 at 5:35 pm #

    I love the idea. Just enough to make me not watch every dollar. I wonder what happens if the govt changes befor July next year. Also, does it give the Govt power of attorney over your property when u die. So for example could they override the family’s wishes to sell your house and for how much?

  12. Louise Chambers January 15, 2019 at 12:55 pm #

    where do we find more information on available loans for pensioners? My mother took out a reverse mortgage with one of the big 4 banks and the interest is ridiculous. She is unable to afford the repayments and eventually the bank will own her house if we don’t do something soon. Any ideas? Who do we contact? Where can she make an application if applicable?
    Thanks in anticipation of your reply.

  13. james young February 20, 2019 at 3:24 pm #

    This is ridiculous!
    I am a full pension recipient and simply need extra money to renbovate, and to live day to day.
    if the government had any compassion for elders they would be offering an easy scheme devoid of petty rules to help, not hinder.
    Where is the care of Australians that so many politicians espouse to aggrandise themselves?

  14. Anton van de Zandt March 6, 2019 at 2:48 pm #

    So many Qs so few answers. Please, at least reply or it looks like not caring, even saying you have no answers would be better than none..My Q: if you still have a mortgage .

  15. Anonymous March 7, 2019 at 12:42 pm #

    Perhaps some of the questions above can be answered by accessing the relevant page with Centrelink:
    https://www.humanservices.gov.au/individuals/services/centrelink/pension-loans-scheme

  16. Edward Flannery May 2, 2019 at 8:42 pm #

    Thanks for having this article, it helps a lot. It’s a well-written blog and it is very informative. Keep on blogging, looking forward to see more of your posts!

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