What is the Pension Loans Scheme (PLS)?

The Pension Loans Scheme (PLS) is a program designed to help asset-rich but cash-poor part-pensioners to receive extra income secured against their home or other real estate. The loan payments are supplied as a supplemental pension, which must be paid back once the property is sold or the owner dies.

With a number of older Australians owning their own homes, but not necessarily having large reserves of cash on hand, the Department of Human Services offers the Pension Loans Scheme to help pensioners who don’t receive the maximum pension payment. If you receive a part-pension, you can apply to take out a loan, using your home or other property as security. The loan will be paid to you fortnightly, supplementing your income.

How do you access the scheme?

To be eligible for the scheme, you need to:

  • be of the Age Pension age
  • own Australian real estate
  • receive less than the maximum pension payment, including no payment
  • have been an Australian resident for at least 10 years

Payments that qualify include:

  • Age pension
  • Bereavement Allowance
  • Carer Payment
  • Disability Support Pension
  • Widow B Pension
  • Wife Pension

If you meet these conditions, you may be able to use your property as security for a loan. Each fortnight you may be paid an amount up to the maximum rate of the pension, minus any payments you already receive. This may continue for as long or as short a period as you like. The exact amount you can receive will depend on your age and the value of your property. You can submit an application for the Scheme on the Department of Human Services website, here.

The government states you will be charged a 5.25% interest rate fortnightly, until you pay back the loan. While you can make a repayment at any time, you don’t need to until you sell the property being used as security, or until your death.

Potential expansion to the scheme

While the Pension Loans Scheme has been around for quite some time, it has been underused, and the 2018 Budget proposed changes to expand the program. Under these changes, subject to legislative approval, the scheme will increase to allow a maximum of 150% of the Age Pension to be borrowed, meaning full pensioners can borrow an additional 50% of the Pension. The scheme would also be expanded to include self-funded retirees who aren’t currently eligible.

If you are retired and own your home but are still struggling to make ends meet, then the Pension Loan Scheme might be worth considering. You can find out more about the scheme on the Department of Human Services website, and learn more about the super industry on Canstar’s dedicated page.

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