Elderly Australians were arguably among the “winners” of the 2018 Federal Budget, with the updated Pension Loans Scheme letting retirees take out a government-issued reverse mortgage on their property and enjoy improved access to retirement income.
In the past, the Pension Loans Scheme was only available to part pensioners and self-funded retirees, who could use the scheme to bring their incomes up to 100% of the maximum fortnightly pension amount.
However, following the 2018 federal budget, the scheme will now be open to all age pensioners who own property in Australia, without affecting their pension entitlements, and allow them to enjoy up to 150% of the maximum fortnightly pension amount.
According to the federal budget papers:
“Full-rate pensioners will be able to support their income by up to $11,799 (singles) or $17,787 (couples) each year by unlocking the equity in their home.”
The interest rate currently charged by the government on the Pension Loans Scheme, 5.25%, is significantly lower than some of the rates on reverse mortgages currently available from major Australian banks, which can be over 6.3%.
It’s important to compare the available options before taking out any reverse mortgage. Consider contacting a financial adviser if you’re not certain if a reverse mortgage will be the best option for your finances.
Other benefits for seniors this budget include:
- Pension Work Bonus – increasing the amount that pensioners can earn without reducing their fortnightly benefit by $1300 to $7800 a year, and extending this benefit to self-employed individuals.
- Skills and Training Incentive – provides up to $2000 to help mature age workers wanting to return to work or transition to new industries to update their skills.
- Restart wage subsidy – $10,000 to employers to support workers over 50 as they start a new career.
- More Choices for a Longer Life Package – about 14,000 more people will get home care packages to stay at home rather than going into aged care facilities.
- Aged care system reform – $82.5 million for mental health services in residential aged care.
- Power of attorney changes – to help combat elder financial abuse
Even Australians who have not yet reached their retirement saw benefits from the federal budget, including the following changes to superannuation:
- The Australian Tax Office (ATO) is set to start proactively finding individuals’ lost super and having it sent to their active superannuation accounts, ensuring it doesn’t get eaten up in ongoing fees.
- Exit fees on super accounts are to be banned, making changing funds more affordable.
- Superannuation funds will be stopped from forcing young people under 25 or with low balances to pay for life insurance policies they have not asked for or do not need.