Back in 2014, the Australia Institute proposed an expansion of the Pension Loans Scheme (PLS) in our report: Boosting Retirement Incomes the Easy Way.
The Australia Institute argued that the PLS, which is effectively a government run reverse mortgage, should not exclude pensioners while allowing wealthier Australians the right to use the mechanism. It took four years of advocacy, but in the 2018 Budget, then federal Treasurer Scott Morrison agreed with the Institute, expanding the PLS to include aged pensioners.
Our research recommended expanding the PLS so that aged pensioners effectively access some of the value of their home without having to sell it. Giving older Australians extra cash, at no cost to government, allows many people to live in their own home with more financial security.
“I’m a financial adviser on the south coast. Currently doing some advice for a client of ours, and the changes to the Pension Loan Scheme which recently came in will make a big difference to her quality of life in retirement. I noticed Tom Swann and Richard Denniss got the ball rolling on it back in 2014. Please pass my congratulations.”
Having the Federal Government involved in such a reverse mortgage arrangement is sensible economics. The expansion of the PLS to include pensioners will keep costs down for customers and over time the scheme will be cost neutral for the government as all loans are repaid and secured against the value of the pensioner’s home.