What is the Pension Loans Scheme?

If you’re planning for retirement or recently retired, it can be a good idea to explore all the income options available to support your changing lifestyle – including one called the Pension Loans Scheme or PLS. While not every retirement income option will suit your personal needs, it pays to do a bit of research so you don’t miss an opportunity to supplement your Government Age Pension payments and super savings.

For homeowners who are eligible, one retirement income option is a government initiative called the Pension Loans Scheme, or PLS. It allows retirees who meet certain criteria to turn the equity in their homes into an income stream.

Pension Loans scheme – the 101

At a basic level, the Pension Loans Scheme allows you, the real estate owner, to take advantage of the equity in your home by borrowing money against the value of your property. You’ll receive that money as a fortnightly income stream that could be up to 1.5 times your personal Government Age Pension entitlement (GAP payment). With a PLS, the money isn’t paid to you as a lump sum like many other loans for pensioners are, and you can choose how much you receive each fortnight.

AustralianSuper retirement expert Wes Hatch says: ‘There’s a range of options to explore when it comes to funding your retirement – the Government Age Pension (GAP), your super savings, and any non-super savings, such as owning a property. To get the best retirement outcome many people need to take advantage of all 3 options in some way. For property owners, the Pension Loan Scheme is one option to consider, and it means you don’t necessarily need to sell your house to access the equity.’

‘As with any financial product you need to have a plan. Knowing how and when you’ll get in and get out of a scheme or product can often be the key to attaining a beneficial outcome. The PLS scheme relies on a number of personal variables, so it’s always good to start off speaking to an adviser,’ says Hatch.

Am I eligible to apply for the Pension Loans Scheme?

The rules regarding eligibility for the PLS changed on July 1, 2019, meaning more Australians are now eligible to apply. Previously, only those receiving part-pensions were eligible, but this has been expanding to self-funded retirees and those receiving full pensions.

Under these new rules, to be eligible you need to be receiving one of the following pension types:

  • Government Age Pension
  • Bereavement Allowance
  • Carer Payment
  • Disability Support Pension
  • Widow B Pension
  • Wife Pension

In addition, you need to:

  • be of Government Age Pension age
  • own real estate in Australia to use as security
  • have appropriate insurance covering that real estate
  • not be bankrupt or subject to a personal insolvency agreement.

So, if you own real estate, the Pension Loans Scheme could be something to consider as a way to boost your retirement income. But it’s a complex scheme, with several criteria which need to be explored in detail in relation to your personal situation. Speak with a qualified financial adviser and visit humanservices.gov.au for more information.

The Pension Loans Scheme is not the same as a reverse mortgage

While taking out a reverse mortgage and applying for the PLS are both ways to turn the value of your home into an income stream there are big differences between the two.

A reverse mortgage lets you borrow a lump sum, using your house as security against the loan. You have to make repayments while you live in your home, and interest is added to the full loan balance.

With a reverse mortgage, the income or capital you receive comes from a financial institution, such as a bank or lender.

The PLS lets you draw an income from the equity in your home over time, there’s no lump sum payment. You accrue interest on the income as you receive it until you pay off the loan. You can also choose to stop receiving PLS income at any time if your needs change – you’re not locked in. The loan can be repaid in part or in full at any time and you don’t actually have to repay anything until you exit the scheme which happens if you choose to pay off the loan, or if you pass away.

Repaying the Pension Loans Scheme

Repaying the money you receive through a PLS loan can be done in part or full whenever you’re ready or able, and any balance owing is taken from the value of your property if you choose to sell it, or when you and your surviving partner pass away.

The income you’ll receive comes from the Australian Government - the same place as your GAP payments.

When it comes to the PLS, the Government is responsible for setting the interest rate, which currently sits at 5.25% per annum1. Compound interest is calculated fortnightly on the amount you’ve been paid to date - not the total amount you’re eligible to receive over time.

AustralianSuper members

If you’re a member of AustralianSuper, you have access to professional financial advice on a fee-for-service basis. Call 1300 300 273 and ask to speak with an advice team member to arrange an appointment, or find an approved adviser.



1 Interest rate correct at time of publication. For the most up to date information visit humanservices.gov.au.

This information is general financial advice which doesn’t take into account your personal objectives, situation or needs. Before making a decision about AustralianSuper, you should think about your financial requirements and refer to the relevant Product Disclosure Statement. AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788, Trustee of AustralianSuper ABN 65 714 394 898.

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