Media Release | 12th May 2021 Pension Boost welcomes Budget enhancements to Pension Loans Scheme

Last night, the Treasurer the Hon Josh Frydenberg, released the 2021 Federal Budget. Whilst there has been much fanfare around big spending commitments leading up to its release there were some very positive developments for the Pension Loans Scheme.

Pension Boost welcomes the proposed changes to commence from 1 July 2022, as they represent 4 of the 5 key changes we’ve been advocating for on behalf of seniors:

  1. A No Negative Equity Guarantee will apply to PLS loans.
    This has been one of the major advocacy reforms Pension Boost has been pushing and so we are very delighted to see that this important protection for seniors will be introduced to level the playing field for all reverse mortgage solutions
  2. Lump-sum option to be introduced
    Singles will be able to access up to $12,385 and couples up to $18,670 via up to two advances in any 12 months period within these maximums (being 50% of the maximum annual rate of the age pension). This is more great news as Pension Boost has been advocating for this as it will help many seniors meet certain larger expenses like repaying credit cards, undertaking home repairs, or replacing an aging car
  3. Investment in raising awareness through improved public awareness This is crucial in our view as very few seniors are aware the government offers this Scheme and what if offers them
  4. Investment in branding We understand that the government intends to change the name of the Scheme to something that is more inclusive of self-funded retirees who are eligible for the Scheme (ie replacing ‘Pension’ with something else - we have suggested Seniors Loans Scheme)

Whilst we are very pleased with the announced No Negative Equity Guarantee, lump-sum option, and investment in awareness-raising reforms we will continue to advocate on behalf of seniors for the PLS interest rate to be benchmarked to the RBA Official Cash Rate (or similar) to improve transparency for seniors. Whilst the PLS rate remains the lowest in the reverse mortgage market (currently 4.50% pa) and has the lowest level of fees and charges, the rate hasn’t been adjusted since it was last reviewed on 1 January 2020. Since then the government has failed to pass on the three COVID-19 emergency reductions to RBA Official Cash Rate during the period March to November 2020 (totalling 0.65%).

If you have any questions on the above feel free to contact us. Or if you’re curious to see if you’re eligible for the PLS, and understand what you could get out of the scheme, try our PLS calculator by clicking on the button below.