With around 76% of all seniors owning their property outright there is an opportunity to downsize but it is no ‘silver bullet’ solution.
Even though the recently announced Retirement Income Review was positive about strategies to sell down the family home, it is not suitable for all. The Review stated that: ‘Use of the Pension Loans Scheme (now known as the Home Equity Access Scheme) is limited. Between 1 July 2018 and 17 January 2020, more than 9,000 people made downsizer contributions.’1
Downsizing is not a panacea for every retiree needing more cash to live on. This is supported by research that most seniors prefer to live in their homes rather than downsizing. The resultant dislocation caused by moving to a new area, away from their familiar surroundings and network of friends, is stressful. See here for National Seniors’ report on downsizing.
“Downsizing may also have an adverse impact on seniors’ Age Pension entitlements, as any large amounts of cash freed up will be included in the means tests” said Paul Rogan, Pension Boost Founder.
The Government’s Pension Loans Scheme (PLS) can help retirees live at home for longer. An alternative to downsizing for retirees is to access the Government’s PLS, which does not affect their Age Pension or self-directed pensions, and allows them to continue living in their homes.
Few people know of the PLS but it’s expected that more seniors who are experiencing difficulties in making ends meet, but don’t want to move out of the family home, will consider this option.
Rogan stated, “The regular fortnightly payment structure of the PLS allows retirees, who are wanting to continue living in their homes, to fund more in-home aged care and related support services — either on a user paid basis and/or subsidised based via an ACAT need assessment.”
To see if you’re eligible for the scheme, give our online PLS calculator a try today.