Exploring your available income options in retirement can help you understand your financial situation. Not every retirement income option will suit your needs. Do some research, so you don’t miss an opportunity to supplement your Government Age Pension payments and super savings. In this article we’ll look at the Pension Loans Scheme.
Key differences between a reverse mortgage and the Pension Loan Scheme
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 them.
With a reverse mortgage:
- You must make repayments while you live in your home, and interest is added to the full loan balance.
- The income or capital you receive comes from a financial institution, such as a bank or lender.
- The interest rate is typically higher than the PLS interest rate. This PLS interest rate is set by the Government and is 4.5% per year1.
With the PLS:
- You draw an income from the equity in your home over time.
- 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 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 money you receive through the PLS can be done in part or full whenever you’re ready or able. 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 as your GAP payments.
- 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.
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.