- Pensioners can borrow up to two lump sum advances in any 12-month period
- The government will also seek to create more awareness of the scheme
From 1 July 2021 the Federal Government will permit two changes to the Pension Loans Scheme (PLS), the government-provided reverse mortgage product:
- Allow participants up to two lump-sum advances in any 12-month period up to a total value of 50% of the maximum age pension annual rate
- Introduce a No Negative Equity Guarantee so those who use the PLS will not have to repay more than the market value of their property
"Overall these changes are welcome," said Tony Negline, Superannuation Leader at Chartered Accountants Australia and New Zealand. "The PLS is an important measure given the private sector reverse mortgage market is very small. Hopefully, in the near future the government will look into the interest rate it charges retirees."
Pensioners are currently charged an annual interest rate of 4.5% that compounds each fortnight on outstanding loan balances.
The government will also seek to raise awareness of the Pension Loans Scheme through improved public messaging and branding, according to the Budget papers.
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