Licensing rules limit advice on the Pension Loans Scheme


Louise Biti

Financial planners will be limited in providing advice on the Pension Loans Scheme (PLS) unless they are adequately licensed.

Louise Biti, Director at Aged Care Steps said, “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 asked the Financial Planning Association to clarify the licensing rules with ASIC and ASIC has now confirmed this.

“This means that 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” explained Biti.

Biti added “If not authorised and clients wish to investigate which equity release product is appropriate (including the use of the Pension Loans Scheme) advisers can refer them to a licensed credit broker who understands the Pension Loans Scheme or to the Centrelink Financial Information Service (FIS), although FIS will only be able to provide advice on the Pension Loans Scheme and not alternative specific equity release products”.

Expansion of the Pension Loans Scheme was announced in the Federal Budget to allow clients who are age pension age to receive payments up to 150% 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. 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.

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