Pension loans scheme (PLS) - description

Objective of the PLS

The PLS is a voluntary, reverse mortgage type loan available to anybody who qualifies for Age and owns real estate in Australia. Through the PLS, people can receive additional regular fortnightly payments.

Centrelink can lend up to 150% of the maximum rate of fortnightly pension (including basic pension rate, pension supplement, ES, and RA, where applicable).

Example: A maximum rate age pensioner who owns their own home can receive a loan up to 50% of the fortnight maximum pension.

Self-funded retirees owning real estate can receive a PLS loan up to 150% of the fortnightly maximum pension.

The person's outstanding debt is subject to a compound interest rate and the debt is secured by a statutory charge over the person's real estate in Australia (1.1.A.320). The debt would normally be paid back to the Commonwealth if the real estate is sold, or from the person's total estate after their death.

How PLS is paid

PLS is a fortnightly payment, paid in addition to Age (or other applicable income support payments).

Background information

The original PLS was introduced in 1985 and was targeted only to assets tested pensioners of age pension age. While there are no new entrants to the 1985 scheme, some loans under this scheme are still in existence. Loans under the old scheme are a debt to the Commonwealth. The interest rate on these loans is not compound, but is a 'simple' interest rate, calculated in advance at fortnightly intervals.

The interest rate on the 1985 PLS was reduced from 10% to 7%, effective from 25 December 1997.

In 1996, the PLS was expanded to include income-tested pensioners of age pension age and some self-funded retirees. Loans became subject to a compound interest rate. Under this scheme, the maximum fortnightly loan plus pension was limited to the maximum rate of pension including the pension and energy supplements and RA, where applicable. Maximum rate age pensioners were unable to benefit from the scheme. The current scheme commenced from 1 July 2019.

Interest rate for the current PLS

The following table shows the interest rates since the start of the scheme:

Date of effect Interest rate
1 January 2020 to present 4.50%
25 December 1997 to 31 December 2019 5.25%
20 March 1997 to 24 December 1997 6.25%
10 July 1996 to 19 March 1997 7.9%

Act reference: SSAct section 1133 Qualification for participation in PLS

Policy reference: SS Guide Age pension (Age) - description, Qualification for PLS, Payability of PLS, Saved cases - PLS before 10 July 1996

Last reviewed: 10 February 2020