Anne Webster (Mallee, National Party) Share this | Hansard source

I rise to speak about the Social Services and Other Legislation Amendment (Pension Loans Scheme Enhancements) Bill 2021. This bill will increase the flexibility of the Pension Loans Scheme, giving senior Australians more options when drawing on the equity in their homes and other real estate assets to improve their living standard in retirement. The guarantee will apply to all scheme participants from 1 July 2022. The guarantee will mean that, when scheme participants settle their debt, they will not repay more than the equity in the property used to secure their loan. This measure will enhance the strong safeguards currently in place, such as conservative age based loan-to-value ratios that minimise the possibility of a participant's debt exceeding the equity in their secured property.

Australians are living more than 10 years longer than they were 50 years ago. We want our senior Australians to enjoy the best quality of life during their retirement, and one of the key factors in achieving this is financial independence. For many senior Australians, the age pension is a key source of retirement income, but, with housing prices increasing significantly in recent years, we are seeing many of our senior Australians becoming paper millionaires with limited ability to access the benefits of their appreciating assets. Since 2003, the median house price in Sydney has grown from around $524,000 to approximately $1.33 million, and in Melbourne from around $280,000 to approximately $973,000. Even in Mallee, prices have gone up significantly in the last few years.

This is where the Pension Loans Scheme comes into play. The PLS was introduced in 1985 and is similar to a reverse mortgage or home equity release product. Like home equity release products available in the private market, the PLS enables Australians of age pension age to voluntarily unlock the equity in their home. It gives them the option of staying in their own home while boosting their retirement income. Importantly, people have complete discretion as to how they spend their money.

In 2019 the Morrison-Joyce government provided access to the scheme for all Australians of age pension age, including self-funded retirees and maximum rate pensioners. We also increased the amount available as a fortnightly loan. These changes have seen a fivefold increase in take-up over the last two years, and there are currently more than 5,000 participants in the scheme.

The changes to the PLS made through this bill will increase the flexibility of the scheme for senior Australians by providing a mechanism through which retirees can access capped lump sum amounts to meet unexpected and larger expenses. The introduction of a no-negative-equity guarantee will give participants confidence that they will not repay more than the equity they have in the property used to secure their loan when settling their debt. These changes will make the PLS a more flexible and attractive option for senior Australians in their retirement. To ensure senior Australians are aware of the scheme, its eligibility requirements and the changes made through this bill, the government will conduct an awareness campaign in the lead-up to implementation of the changes on 1 July this year.

It's estimated that around 80 per cent of senior Australians over the age of 65 are homeowners. The changes introduced with this bill will give older Australians more freedom to enjoy their retirement. This could be the freedom to visit their grandkids post COVID, to purchase that one special thing they have always wanted, to make repairs to the house, or just to remove financial pressures in day-to-day life. Over time, these reforms and our world-leading home equity regulation will help change the way we view homeownership. Your home is more than simply a place to live; it is a store of value that can be released to boost retirement living standards.

So how does it work? From 1 July 2022, participants in the scheme will be able to access up to two capped payments in any 26-fortnight period. Participants in the scheme will be able to access a portion of their payment as a lump sum advance. This will give retirees a new mechanism and greater flexibility to meet unexpected or substantial expenses. The maximum lump sum advance is capped at 50 per cent of the maximum fortnightly rate of age pension over the following 12 months—that is, 26 fortnights. Based on current age pension rates, the maximum advance payment will be around $12,500 for singles and around $18,964 for couples combined.

Participants will be able to take up to two advances in any 26-fortnight period, with the combined total limited by the 50 per cent cap. Any advance taken will reduce the amount of the fortnightly Pension Loans Scheme payment received by a participant. The amount a participant can receive will generally be the same, regardless of whether they take an advance payment, fortnightly payments or a combination of both. This will protect participants from building excessive debt balances while providing them with flexibility on how they draw on their real estate assets for self-support. As with all financial products, it's important to note that people considering participating in the scheme are advised to seek independent financial advice to ensure the Pension Loans Scheme works for them.

Homeownership has always been the bedrock of our society. We know that most Australians want to stay in their own homes during retirement—often a place with decades of memories. We want to give older Australians the confidence to tap into a small proportion of their home equity to increase their retirement outcomes. This bill is all about giving our senior Australians more choice and control in their retirement lifestyle.

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