If you’ve never heard of it, the PLS is essentially a voluntary government-funded ‘reverse mortgage’ that offers older Australians an income stream to support their retirement income (you can check if you’re eligible here).
But last year, the Government announced changes to the PLS that will come into effect on 1 July 2019.
The new arrangements will allow most home-owning pensioners to access an amount up to 50 per cent above the full pension – $425 a fortnight for a full single pensioner, and even more for a couple.
Under the current rules, to access the PLS you must quality for an eligible pension and also have a payment rate above $0 for either the income or assets test. But from 1 July 2019, while you still need to qualify for an eligible pension, you can have a payment rate of $0 for either test and still access the scheme.
The eligible pensions are: the Age Pension, Bereavement Allowance, Carer Payment, Disability Support Pension, Widow B Pension and the Wife Pension.
We think the changes are a very positive step. It means more older Australians will be able to access the scheme, and those already using it could get up to 1.5 times the maximum rate of pension every fortnight.
And with more than 128,000 Australians waiting to receive a home care package, the timing is right.
The additional income from the new PLS arrangements could potentially be used to financially support the care of senior Australians who otherwise have little available cash resources or income above the base pension.
Discussion1 Comment
As we know from the reverse mortgage industry, 96% of borrowers have a lump sum or Line of Credit requirement, which is not available in the Pension Loan Scheme.
There will be many 66- 80 year old’s using their equity well before the time arrives to receive home care. For fit and enthusiastic couples and singles, accessing up to $18,000 per year ($12,000 for singles) will make a significant difference to the lifestyle.
The real lack of understanding is highlighted by including self funded retirees as approved participants in the scheme. A couple with a $3.0m home and $1.0m in super can access $54,000 per year from the appreciating value of the family home and only accessing the minimum level from the super fund.
Yes, it was designed as a tool to fund home care contributions, but clearly by that time of necessity, the amount of allowable borrowings may well be exhausted.