1.2.3.50 Home equity access scheme (HEAS) - description

Objective of the HEAS

The HEAS (known as the PLS prior to 1 January 2022) is a voluntary, reverse mortgage type loan available to anybody who:

  • is of age pension age, or is partnered to somebody who is
  • qualifies for either Age, DSP, CP, and
  • owns real estate in Australia.

Through the HEAS, a person can choose to receive:

  • A fortnightly payment (combining any pension plus HEAS loan) of up to 150% of the maximum rate of fortnightly pension (including basic pension rate, pension supplement, ES, and RA, where applicable).
  • Up to 2 lump sum advances in any 26 fortnight period, capped at a combined maximum of 50% of the maximum annual rate of Age (including basic pension rate, pension supplement, ES, and RA, where applicable).

Note: Receiving HEAS as an advance will reduce a person's maximum allowable fortnightly HEAS payments for the subsequent 26 fortnight period.

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

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

HEAS loan payments accrue as a debt to the Commonwealth. 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 (unless the debt is transferred to another property), or from the person's estate after their death. A no negative equity guarantee ensures the amount owed at exit does not exceed the market value of the securing property, less any non-HEAS encumbrances.

Act reference: SSAct section 1133 Qualification for participation in pension loans scheme

Policy reference: SS Guide 1.2.3.10 Age pension (Age) - description, 3.4.5.10 Qualification for HEAS, 3.4.5.40 How the HEAS is paid, 3.4.5.50 Payability of HEAS, 3.4.5.55 No negative equity guarantee (NNEG)

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 scheme was changed on 1 July 2019 and the maximum fortnightly loan plus pension was increased to 150% of the fortnightly maximum rate of pension, and eligibility extended further to more self-funded retirees.

On 1 January 2022, the PLS was renamed the HEAS.

On 1 July 2022, the HEAS was changed to include:

  • The option for HEAS participants to access lump sum advances, capped at a combined maximum of 50% of the maximum annual rate of pension (including basic pension rate, pension supplement, ES, and RA, where applicable).
  • A no negative equity guarantee (NNEG), which ensures the amount owed on exit from the scheme will not exceed the market value of the properties used to secure the loan, less any non-HEAS encumbrances.

Policy reference: SS Guide 3.4.5.55 No negative equity guarantee (NNEG), 3.4.5.100 Saved cases - PLS before 10 July 1996

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