A change of name for the Pension Loans Scheme (PLS) and a reduction in the interest rate applied by the government will make the program more understandable and accessible, according to a representative body for self-funded retirees.
Association of Independent Retirees national president Wayne Strandquist said the program’s new name, the Home Equity Access Scheme (HEAS), better described the purpose of the measure and that it was not only intended for age pensioners.
“The criteria for the scheme to access the equity held in their family home remains the same where applicants must be over the qualifying age for an age pension, but its new name will broaden its appeal to self-funded retirees and potentially increase the take-up of the scheme,” Strandquist said.
The new name was announced yesterday by Prime Minister Scott Morrison, who also said the government would reduce the interest rate applied to the scheme from 4.5 per cent to 3.95 per cent. The scheme allows retirees to access a voluntary non-taxable fortnightly loan of up to 150 per cent of the age pension payment.
“The Association of Independent Retirees had previously appealed to the government that the interest rate of 4.5 per cent was too high and well above the available home loan interest rate and it should be reduced,” Strandquist said.
“These latest changes to the HEAS announced by the government, together with the changes introduced into parliament early in December that provide for a no negative equity guarantee and access to capped lump sum payments, will take the pressure off retirees and enable them to improve their living standards.”
The changes were also welcomed by HEAS specialist advisory group Pension Boost, which had also called for a reduction in the interest rate, according to founder and chief executive Paul Rogan.
“We had raised a petition supported by approximately 1700 people to have the PLS rate reduced and are pleased to see the government has acted,” Rogan said.
“Whilst the PLS rate has been improved, the reduction reflects changes that should have been made when the Reserve Bank of Australia made COVID-19 emergency reductions to the benchmark interest rate during 2020.”
He added a fairer and more transparent rate-setting mechanism still needs to be applied to the HEAS so retirees can have greater confidence and trust in the scheme, and that change would remove impediments to making it a more attractive reverse mortgage facility for senior consumers.