Noel Whittaker's Blog The Pension Loans Scheme (PLS) for retirees will be useful in certain circumstances. But, as a reader has just pointed out, it is not available to everybody.
He has chosen to retire to a manufactured home which is situated on leasehold land. Because the land is leasehold, he has no title to the property, and is unable to access the PLS.
A departmental spokesperson tells me that the Pension Loans Scheme (PLS) is a form of reverse mortgage that allows older Australians to access the equity in their home to improve their standard of living in retirement by receiving additional fortnightly payments from Centrelink in the form of a loan.
Consistent with any reverse mortgage the loan needs to be adequately secured to make sure the loan can be repaid. Under the PLS, a loan needs to be secured against a real asset on which the Commonwealth can register a charge (section 1138 of the Social Security Act 1991).
This means a person must own the property and have their name on the title to be eligible. For example, people who have ownership (freehold title) of their premises in a retirement village would be eligible for a loan under the Scheme, however those with a leasehold, loan or licence to occupy arrangement, would not.
Assets, which by themselves, may depreciate in value, such as many manufactured homes, cannot be used to secure a PLS loan as they do not adequately protect the Commonwealth’s interest in recovering the loan debt, nor do they adequately protect the person’s interest in being able to repay the loan debt.
This is a complex issue, and a warning to anybody considering downsizing to make sure that the new residence is available for the Pension Loan’s Scheme if they think they might need it.