In its new report Boosting retirement incomes the easy way – Extending the Pension Loan Scheme to all retirees The Australia Institute calls on government to extend its banking services.
The report shows that the government is currently willing to lend to wealthy retirees through low cost ‘reverse mortgages’ using Centrelink’s “Pension Loans Scheme”. The Australia Institute argues that expanding the Pension Loans Scheme would not only be fairer, but would help retirees boost their own incomes at a low cost to themselves, and at no cost to the government.
Co-author and researcher at The Australia Institute, Tom Swann, says the Pension Loan Scheme allows retirees to boost their income by borrowing against equity in their own property. “However those on the pension are not eligible. Only wealthy retirees can borrow through the scheme.”
In the report, it is suggested the PLS payments be made available to all citizens of pension age. “The existing rules about the maximum loan/valuation ratios would apply to the expanded PLS,” the report states. “Expanding the PLS would allow an existing retiree on the full age pension who owned their own home to potentially double their retirement income (depending on their age and the value of their home) by borrowing against the equity in their home. Similarly, a very wealthy retiree who is currently ineligible for the age pension would remain able to borrow the equivalent of the full age pension.”
Mr Swann says: “Unlike the $36 billion spent this year on superannuation tax concessions, which are an unfair and expensive way to boost future retirement incomes, an expanded Pension Loan Scheme would boost the retirement incomes of current retirees while costing the government nothing
“Despite all the attention on the financial services sector, governments can offer simple financial services on terms that are competitive and that cause less financial stress. The Pension Loan Scheme offers interest rates substantially below market rates. Governments should be offering a lot more of these sorts of banking services” Mr Swann said.
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