Financial planners will be limited in providing advice on the pension loans scheme (PLS) unless they are adequately licensed, a specialist aged-care expert has warned.
“We identified a potential licensing issue and have now confirmed that the pension loans scheme will come under Australian credit licensing rules,” Aged Care Steps director Louise Biti said.
Aged Care Steps asked the Financial Planning Association to clarify the licensing rules with the Australian Securities and Investments Commission (ASIC), which the corporate regulator has confirmed.
“This means unless an adviser is authorised under an Australian credit licence, they cannot provide advice on the pension loans scheme and will be limited to strategy advice on the use of equity release options in general,” Biti noted.
“If the adviser is not authorised and clients wish to investigate which equity release product is appropriate – including the use of the PLS – advisers can refer them to a licensed credit broker who understands the PLS or to the Centrelink Financial Information Service (FIS), although FIS will only be able to provide advice on the PLS and not alternative specific equity release products.”
Expansion of the PLS was announced in the federal budget to allow clients who are age pension age to receive payments up to 150 per cent of the maximum pension entitlement, less any pension they receive.
Clients will need to use property as security, with the government registering a caveat over the property.
The new rules are proposed to be effective from 1 July 2019, but legislation is yet to be passed, Biti said.
If passed, it opens another opportunity for clients to fund aged-care needs using equity in their home, especially clients wanting to top up home care, or while waiting for a home-care package to be allocated.
A PLS is a voluntary reverse equity mortgage that offers older Australians an income stream to supplement their retirement income.
