Paul Rogan

Major enhancements that Pension Boost has been advocating for will be made to the Pension Loans Scheme (PLS) from 1 July 2022.

• A No Negative Equity Guarantee will apply to PLS loans: This has been one of the major advocacy reforms Pension Boost has been pushing and so we are very delighted to see that this important protection for seniors will be introduced to level the playing field for all reverse mortgage solutions.
• Lump-sum option to be introduced: Singles will be able to access up to $12,385 and couples up to $18,670 via up to two advances in any 12 month period. (Note: this represents 50% of the annual rate of the full Age pension). This is more great news as Pension Boost has been advocating for this as it will help many seniors meet certain larger expenses like repaying credit cards, undertaking home repairs, or replacing an ageing car.
• Investment in raising awareness: through improved public awareness and branding. This is crucial in our view as very few seniors are aware the government offers this Scheme and what it offers them.

More seniors to access downsizing contributions to super

• From 1 July 2022, seniors choosing to downsize who are at least 60 years of age will be able to contribute up to $300,000 each from their home sale into their super.
• The change is that previously you had to be 65. You continue to need to have owned your property for at least 10 years.
• This measure seeks to assist seniors to fund their retirement and to release housing stock for larger families
• This measure is only expected to benefit self-funded retirees not eligible for the age pension or possibly those with modest homes on the full age pension
• Beware of downsizing as it can lead to increased financial assets which could impact your age pension eligibility. Pension Boost recommends you seek advice before downsizing
• An alternative to downsizing which doesn’t impact your age pension eligibility is accessing the government’s Pension Loans Scheme (PLS) to release the equity in your home to assist with funding your lifestyle

Easier for self-funded retirees to top up their super

• From 1 July 2022, self-funded retirees will be able to contribute to super without meeting the work test (which is being abolished)
• Currently, people between the ages of 67 and 74 need to satisfy the work test to be able to top up their super with voluntary contributions

Aged Care to receive much-needed funding

• Post the damning royal commission into aged care, the government will increase funding into aged care by approximately $18bn over 4 years
• An additional 80,000 in-home care packages will be funded, bringing the total to 275,000 packages
• An additional $10 per resident per day will be provided for residential care facilities
• Includes significant investment in resources, staff levels, skills and training
• Whilst a welcome and needed improvement, industry estimates are that an additional $7bn per annum are required to solve the problems identified by the royal commission, noting that the government already supports the aged care sector with $21bn in annual funding

What was disappointing about this Budget?

Pension Boost will continue to advocate on behalf of seniors for the PLS interest rate benchmarked to the RBA Official Cash Rate (or similar) to improve transparency for seniors. The PLS rate (currently 4.50% pa) was last reviewed on 1 January 2020 and the government has not passed on the three COVID-19 emergency OCR reductions during 2020 (totalling 0.65%).

Pension Boost was also hoping to see amendments to wind back the age pension taper rates to increase age pension entitlements for seniors but this also has remained unchanged. The taper rate changes introduced in January 2017 adversely impacted many age pensioners with several industry submissions made to wind these back going unheeded.

By Paul Rogan, Founder and CEO

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Paul Rogan

The founder of a retirement specialist that assists seniors to access the Government’s reverse-mortgage solution (known as the Pension Loans Scheme) hopes that the Retirement Income Review leads to more help for struggling retirees.

Paul Rogan from Pension Boost wants to see more than just an increase in product offerings for retirees. Solutions that supplement existing retirement income streams already exist for home-owning retirees.

“Many retired baby boomers have most of their capital in their homes but hold a limited amount of superannuation. The majority have access to some Age Pension and do not want this put at risk.

“In coming from a position of caution, many are overlooking the benefits to them of the Pension Loans Scheme. With more than 1.8 million age pensioners owning their own homes, the potential to top up their income without affecting their Age Pension eligibility is significant,” said Paul Rogan, founder of Pension Boost.

Mr Rogan believes that five changes could materially remove barriers to take up of this innovative Government-backed reverse mortgage which is available everywhere in Australia:

• Investment in seniors’ education and awareness of the PLS
• Change the name to be more inclusive (for example, ‘Seniors Loans Scheme’). Australians equate the word ‘pension’ with being an Age Pensioner and a simple name change would clear up confusion
• Allow a one-off upfront lump sum for larger expenses with the balance of the loan paid in fortnightly instalments. Retirees may have home repair/maintenance costs or need a new vehicle that their savings cannot provide for
• Reduce the PLS interest rate from 4.5 per cent to a more appropriate level considering the cost of funds and operating scale advantages the government has over commercial providers. Further, the PLS rate should be independently benchmarked to the RBA official cash rate (or RBA standard home loan variable rate) to improve transparency for seniors
• Improve protection for senior consumers by providing a ‘no negative equity guarantee’ (equivalent to regulations applying to commercial reverse mortgage providers since 2012).

More choice in retirement income products is needed, the need for people to not sacrifice themselves in retirement is important and Mr Rogan applauds the Government for raising the level of debate on retirees living better and with less money stress.

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Paul Rogan

An increasing number of retirees – many of whom were not financially prepared when they stopped working – are seeking ways to live in their homes and find other sources of income to support their lifestyle.

With more than 3 million Australians over the age of 65 and more than 75% of them owning their homes or property (at values often multiples of their superannuation balances) the option to tap into their home equity to assist funding their retirement is something more Australians are expected to consider. One such option is the federal government’s Pension Loans Scheme (PLS)

What is the Pension Loans Scheme?

The PLS has been in operation in various forms since 1985 and it is one of the Australian Government’s best kept secrets. The intent of the PLS is to assist seniors fund their regular costs of living by accessing some of the equity they have in their home or property.

Historically, the PLS hadn’t had significant take up by seniors due to its restrictive eligibility rules, and not being actively promoted by the Government. However, that all changed on 1 July 2019 as now all Australian resident seniors who own property can access the PLS, including self-funded retirees.

The PLS is a ‘reverse mortgage’ style contract where the Australian Government provides you with a loan amount each fortnight – at a maximum payment level of 150% of the Full Age Pension less any government pension you currently receive. The table below provides examples of how this works form different types of retirees.

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Paul Rogan

Pension Boost has a petition running to bring the government’s reverse mortgage solution known as the Pension Loans Scheme (PLS) into line with regulations that have applied to commercial reverse mortgage providers since 2012 which were introduced to protect vulnerable seniors.

“The numbers may be modest, but the sentiment amongst seniors is strong and government needs to listen if they want to remove barriers to the take up of the PLS across Australia,” said Paul Rogan, Pension Boost Founder and CEO.

Pension Boost strongly believes that all seniors should be afforded equivalent protection when accessing ‘reverse mortgage style contracts’ irrespective of whether they are provided by commercial providers or the government. Currently, the government provides no protection to consumers for negative equity situations arising from the PLS.

Absent this crucial consumer protection, the most vulnerable seniors (or their estates) may be exposed to the risk of owing the government a debt after their home is sold. Based on the thousands of PLS projections Pension Boost has done for clients, the seniors most exposed to negative equity risk appear to be those who:

• Have modest levels of net equity in their home
• Have a relatively large existing loan mortgaged against their home
• Live in remote or rural areas with low property growth rates/prospects
• Are relatively early in their retirement (late 60s/early 70s) so can be expected to live for another 25 years or more.

Pension Boost works on behalf of Retirees considering PLS
Pension Boost is a private commercial venture founded by Paul Rogan in 2019. Its purpose is to assist everyday Australian seniors to live a better life. There are 1.8 million seniors on the Age Pension who own property, with many struggling to make ends meet.

Pension Boost are specialists in the Australian Government’s Pension Loans Scheme (PLS). They act as agents for clients when dealing with Centrelink/DVA to take the hassle out of the process.

Some of the ways Pension Boost assists seniors include:

• Raising awareness of the PLS (one of the government’s best kept secrets)
• Educating seniors on what the PLS is, its ‘rules’ and how it works
• Assisting seniors and their families decide whether the PLS may be of benefit to them
• Demonstrating to seniors via the Pension Boost Calculator what the PLS may mean for them and their families financially
• Determining the type of Pension Loan that best suits a senior’s individual circumstances
• Removing the hassle of dealing with Centrelink/DVA by acting as an ‘agent’
  • Assisting seniors with their application for the Pension Loan
  • Dealing with any questions or queries raised by Centrelink/DVA
• Providing ongoing reporting and reviews of a senior’s cash flow needs and Pension Loan level, to ensure they remain in control of the net equity in their home, and have the funds to make ends meet.

By Paul Rogan, Founder and CEO

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• Background information: Government ‘double standards’ placing Australian Pension borrowers at risk
• Petition at change.org: Protect seniors – introduce a No Negative Equity Guarantee to the Pension Loans Scheme

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Paul Rogan

Pension Boost is originating around 10 per cent of its government-run Pension Loans Scheme (PLS) reverse mortgages with self-funded retirees since the reforms were introduced in July 2019.

The changes, which now allow self-funded retirees to access the PLS, have been fortunately timed as these retirees have been adversely impacted by the economic impacts of COVID-19 with lower cash rates and the falls in bank dividends, plus lower rental income from investment properties.

Self-funded retirees have been heavily reliant on these sources to fund their lifestyle. Moreover, this group is highly reluctant to sell down assets given market volatility impacts on portfolios. The temporary 50% reduction in the minimum drawdown rates from super pensions has provided some shelter but that does not solve their need for income to live on.

Self-funded retirees can now access the government’s Pension Loans Scheme (PLS) to tap the equity they hold in real property by up to $55,520 yearly.

Example: Self-funded couple aged 70 with $2m in their SMSF; accessing PLS

• Own their $1.5m home outright
• Want to preserve as much of their SMSF portfolio as possible so chose to draw the revised pension minimum of 2.5% (i.e. their $100,000 pension reduces to $50,000 pa)
• Use the PLS to top up their foregone income
• They decide to draw the maximum PLS to access $2,135 per fortnight (or $55,520 yearly) to supplement their super pension for 2 years when, hopefully, they expect markets to recover post COVID
• Once markets recover, they intend to draw more than the minimum super pension to paydown the PLS (even though they are not obliged to make any repayments of the PLS being a reverse mortgage-style solution).

By Paul Rogan, Founder and CEO

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Paul Rogan

With around 76% of all seniors owning their property outright there is an opportunity to downsize but it is no ‘silver bullet’ solution.

Even though the recently announced Retirement Income Review was positive about strategies to sell down the family home, it is not suitable for all people. The Review also stated that: ‘Use of the Pension Loans Scheme is limited. Between 1 July 2018 and 17 January 2020, more than 9,000 people made downsizer contributions.’^[1]

Downsizing is not a panacea for every retiree needing more cash to live on. This is supported by research that most seniors prefer to live in their homes rather than downsizing, as a way to release equity to fund retirement. The resultant dislocation caused by moving to a new area, away from their familiar surroundings and network of friends, is stressful. (See National Seniors’ report on downsizing.)

“Downsizing may also have an adverse impact on seniors’ age pension entitlements, as any large amounts of cash freed up will be included in the means tests” said Paul Rogan, Pension Boost Founder.

The Government’s Pension Loans Scheme can help retirees live at home for longer

An alternative to downsizing for retirees is to access the Government’s Pension Loans Scheme which does not affect their Age pension or self-directed pensions and allows them to continue living in their homes.

Few people know of the Pension Loans Scheme (PLS), but it’s expected that more seniors who are experiencing difficulties in making ends meet but don’t want to move out of the family home will consider this option.

“PLS also allows retirees wanting to live on in their homes to fund more aged care and related support services in-home, either on a user paid basis and/or subsidised based via an ACAT need assessment.

“This loan scheme gives seniors more options to fund regular expenses like aged and home care services. The regular, fortnightly payment structure of the PLS suits the funding of extras and essential services.

By Paul Rogan, Founder and CEO

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