The recent changes to the Centrelink assets test has reduced or eliminated income support entitlements for many part pensioners. However, Centrelink’s “Pension Loans Scheme” offers a way to generate additional regular cash flow to improve one’s quality of life.
The scheme is a type of government provided “reverse mortgage”, available to people receiving less than the maximum payment rate (or no payment due to either to income or assets test but not both) and includes recipients of the Age Pension, Wife Pension, Disability Support Pension, Widow B Pension,Carer Payment or Bereavement Allowance.
Essentially, the loan is secured against the person’s equity in their home or other Australian property and the current interest rate is 5.25%. Payments are made fortnightly (no lump sums are available) as part of the normal pension payment process and up front costs such as legal fees can be added to the loan or paid. The interest can accrue to your loan account so that no repayments are required or repayments can be made at any time.
Also, when selling your property, you can either transfer the loan to another property or you can repay the loan on the settlement date. If there is an outstanding loan after your death, your estate or in some cases your surviving partner’s estate can make repayments.
In summary, the scheme is a worthy of consideration for eligible people and may allow them to enjoy a better quality of life without having to sell their home or other valuable assets.