by Ebony Bennett, Deputy Director
The move to expand the under-utilised Pension Loan Scheme (PLS) in the federal budget to allow pensioners access to the scheme is a welcome change, and credit where it is due: congratulations to Scott Morrison for delivering this budget breakthrough.
This is sensible economic reform which will allow those on the aged pension to effectively access some of the value of their home without having to sell it.
The PLS, which is effectively a government run reverse mortgage, has the potential to make a real difference to people’s lives. Giving older Australians extra cash, at no cost to government, will allow many people to live in their own home with more financial security. The scheme deserves more promotion generally.
It never made sense to exclude pensioners from accessing the scheme while allowing wealthier Australians the right to use the mechanism.
Having the federal government involved in such a reverse mortgage arrangement is sensible economics. The PLS will keep costs down for customers, the financial infrastructure is already in place 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.
The Australia Institute proposed an expansion of the Pension Loan Scheme back in our 2014 report: Boosting Retirement Incomes the Easy Way.
Subsequently a collection of diverse Senate cross benchers united to pursue the idea and had it costed by the Parliamentary Budget office: Parliamentary Budget Office Costings of expanded Pension Loan Scheme
From all of the team at The Australia Institute, thanks for reading.
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