Pension Loan Scheme

The Pension Loans Scheme (PLS) is a voluntary arrangement that can be entered for either a short defined term or an indefinite period.  It is available to individuals of pension age who own property and do not currently receive the maximum benefit for a Centrelink qualifying payment.  The PLS allows eligible pensioners to increase their pension income stream to the maximum Age Pension rate of payment through a loan from the government.  The PLS is paid in regular fortnightly non-taxable instalments, and has recently gained traction as a means to unlock potential equity in Australian real estate.  

​Eligibility  

You may be eligible for the PLS if:

• You or your partner is of 'age-pension age'  (currently age 65+)
•  You have equity in Australian real estate (to serve as security for the loan)
•  You or your partner currently receive a reduced, or nil, rate of a qualifying payment for the scheme*, due to the application of either the income test or the assets test, but not both
• You meet 'Age Pension residence requirements'

 It is important to note that two of the above requirements may be satisfied by either you or your partner, while two must be satisfied by you. 

 *Centrelink's qualifying payments for the PLS include the Age Pension, Disability Support Pension, Carer Payment and others. Please refer to Centrelink’s website. 

 Rates and Payments

All establishment costs (for example, solicitor fees and loan finalisation) must be paid by the account holders (i.e. you).  The loan has a 5.4% effective annual interest rate, which is charged at a rate of 0.202% on the outstanding loan balance each fortnight.  Interest will accrue on the loan and will continue to do so until it is fully repaid.  If you choose to sell your property prior to the full repayment of the loan, you must contact Centrelink so that arrangements can be made for the loan to be repaid with the proceeds on the day the sale is finalised (settlement date).  The loan may also be serviced by a deceased estate.  

Our Comments

The PLS is a stable and growing avenue for Australian pensioners to maximise their pension income streams from Centrelink by employing their own equity as security.  Where used appropriately, it can aid pensioners to live out their golden years with reduced financial stress.  For some it provides an alternative to a reverse mortgage, so an argument could be made that government should not be competing with the private sector.