The scheme, launched in 2018, has yet to gain much traction among older Australians
Changes to the government’s reverse mortgage program will spur greater participation among older Australians, senior groups and financial advisors say.
The Pension Loans Scheme, as it was formerly known, allows retirees to draw equity out of their home through a non-taxable fortnightly loan from Services Australia, according to The Australian Financial Review. The government recovers the debt when the property securing the loan is sold, or from the estate following the borrower’s death.
The program hasn’t proved popular, however. It was established in the 2018 budget, and currently has only 5,100 participants.
On Wednesday, Social Services Minister Anne Ruston announced that the government would rebrand the program as the Home Equity Access Scheme and cut the interest rate from 4.5% to 3.95%. The changes will take effect Jan. 1, AFR reported.
The rebranding was the right move, according to Pension Boost founder Paul Rogan, who said the program’s low participation was a result of its name.
“Renaming is good because people who are self-funded have been put off because they think they’ve got to be on the pension,” Rogan told AFR.
The program is open to all Australians who are 66 or older and own real estate. Rogan said the government needed to launch a well-funded advertising campaign to inform seniors about the program.
“The rebranding is good, but there’s not much point just putting a rebranded product on the shelf,” he said. “They’ve still got to get on with putting it out there.”
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Ian Henschke, chief advocate for National Senior Australia, said the program’s old name was “confusing.”
“Many people didn’t realize they were eligible, and many also were put off by the high interest rate,” he told AFR.
Rogan said the new interest rate of 3.95% was “very competitive.”
“It was already the lowest in the market, and there’s no material fees that government charges apart from some upfront legal costs, so it’s a very competitive proposition,” he said. “The thing that we still believe needs to happen is that the rate-setting mechanism itself needs to be more transparent for consumers.”
