Senate debates

Wednesday, 30 March 2022


Social Services and Other Legislation Amendment (Pension Loans Scheme Enhancements) Bill 2021; Second Reading

8:08 pm

Photo of Anne RustonAnne Ruston (SA, Liberal Party, Minister for Families and Social Services) Share this | | Hansard source

I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

S ocial Services and Other Legislation Amendment (Pension L oans Scheme E nhancements) B ill 2021

The Morrison Government is increasing the flexibility of the Pension Loans Scheme to give our senior Australians more choices in their retirement.

The Retirement Income Review highlighted that accessing a portion of a person's home equity can greatly improve their living standards in retirement. This is particularly true for those senior Australians who hold substantive assets but have limited income.

Around 80 per cent of those over the age of 65 are homeowners, with many of our senior Australians having significant equity in their home or other real estate assets.

The Pension Loans Scheme gives our senior Australians another option for using their accumulated wealth to support their retirement lifestyle.

Participation in the Pension Loan Scheme is voluntary and the Scheme is similar to a reverse mortgage product.

It provides senior Australians the option of drawing a fortnightly loan amount, backed by the equity in their home or other real estate assets, to supplement their other retirement income.

Through the Scheme, pensioners can top up their pension payment with loan payments, up to a maximum of 150 per cent of the fortnightly rate of the Age Pension. Eligible non-pensioners, such as self-funded retirees, can receive the full 150 per cent of the fortnightly rate of the Age Pension in loan payments.

The Morrison Government enhanced the Pension Loans Scheme in the 2019-20 Budget by expanding its eligibility to all older Australians of Age Pension age and increasing the maximum allowable fortnightly combined pension plus loan from 100 per cent to 150 per cent of the rate of the Age Pension. This allowed maximum rate pensioners to participate in the Scheme for the first time.

Since those changes came into effect on 1 July 2019, the number of participants in the Scheme, as at 30 September 2021, has grown from around 780 to over 5,000. This six-fold increase in two years demonstrates that the Scheme is meeting the needs of our senior Australians.

This Bill will introduce two additional features to the Pension Loans Scheme to further increase flexibility and confidence in the Scheme for those senior Australians who choose to use it. These measures will come into effect on 1 July 2022.

Firstly, a "No Negative Equity Guarantee", will apply to all Pension Loans Scheme participants. It will mean that when Scheme participants settle their debt, they will not repay more than the equity they have in the property used to secure their loan.

Introducing a No Negative Equity Guarantee brings the Pension Loans Scheme in line with a obligation placed on private providers of reverse mortgage products, who have been required, since 2012, to provide a No Negative Equity Guarantee to users of home equity products.

The No Negative Equity Guarantee will provide additional confidence for participants of the Pension Loans Scheme. It builds upon the strong safeguards already in place to minimise the possibility of a participant's debt exceeding their secured equity.

These safeguards include:

      Secondly, participants of the Pension Loans Scheme will be able to access a portion of their payment as a lump sum advance.

      This option to choose a lump sum advance will give retirees greater flexibility and a new mechanism to help them meet unexpected and or substantial expenses.

      The maximum lump sum advance will be capped at 50 per cent of the maximum fortnightly rate of the Age Pension over 26 fortnights.

      Based on current Age Pension rates, the maximum advance payment will be, over a 26 fortnight period, around $12,580 for singles and around $18,960 for couples combined.

      Any advance taken will reduce the amount of fortnightly Pension Loans Scheme payments a participant can receive.

      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.

      Consequently, the maximum amount a participant can receive in loan payments will generally be the same irrespective of whether they take an advance payment, fortnightly payments, or a combination of both.

      These measures will ensure that participants do not build up excessive debt balances, while providing them flexibility and choice in how they tap into the equity of their real estate assets.

      To complement the introduction of these new measures, the Morrison Government will embark on a campaign to raise awareness of the Pension Loans Scheme.

      Although the Pension Loans Scheme has operated since the 1985, awareness among our senior Australians remains low and there remains a misconception that only those people receiving the Age Pension can access the Scheme.

      While participants need to be of Age Pension age, they do not actually need to be receiving a pension payment in order to qualify for the Scheme.

      The awareness raising campaign will help our senior Australians improve their understanding of the Scheme and the new features can be used to improve their living standards in retirement.

      Home ownership has always been the bedrock of our society. This Bill will give our older Australians more confidence to tap into a small proportion of their home equity to increase their retirement outcomes.

      We want our senior Australians to enjoy greater choice, financial independence and quality of life in their retirement years.

      I seek leave to continue my remarks later.

      Leave granted.

      8:09 pm

      Photo of Patrick DodsonPatrick Dodson (WA, Australian Labor Party, Shadow Assistant Minister for Reconciliation) Share this | | Hansard source

      I rise to speak on the Social Services and Other Legislation Amendment (Pension Loans Scheme Enhancements) Bill 2021. I move the second reading amendment on sheet 1588 circulated in my name:

      At the end of the motion, add ", but the Senate notes that the Coalition Government has repeatedly tried to cut the pension, including pensioner concessions, the assets test and indexation, and attempted to increase the pension age to 70".

      The Pension Loans Scheme allows older Australians to get a loan from the Australian government to supplement their retirement income. This important social security program is a legacy of the Hawke government, offering older Australians the opportunity to tap into their home equity and unlock cash for an improved standard of living.

      Despite the benefits of the scheme, take-up rates have been very, very low. Only around 5,000 participants currently access the scheme. This is against a potential four million senior Australians of pension age, including around 2.6 million age pensioners of which 80 per cent are homeowners. The lack of take-up is primarily because of the barriers to access. These barriers are well known and have been known for the nine years of this government. Labor welcomed and supported previous changes made in 2018, but clearly more needs to be done.

      These latest changes have come too late. Pensioners won't be fooled by this government and its last minute attempt to support them. Pensioners know that this government has tried to cut the age pension and reduce their living standards at every possible opportunity. In the 2014 budget, they cut $1 billion from pensioners' concessions. They axed 900 senior supplements to self-funded retirees, and they tried to reset the deeming rates threshold and cut pension indexation. In 2015, they did a deal with the Greens to change the pension assets test, cutting the pension to around 370,000 pensioners by as much as $12,000 a year. In the 2016 budget, they tried to cut the pension to around 190,000 pensioners as part of a plan to limit overseas travel for pensioners to six weeks, and they tried to cut the pension to over 1.5 million Australians by scrapping the energy supplement for new pensioners. The government also spent five years trying to increase the pension age to 70.

      Spiralling out-of-pocket healthcare costs are a bigger concern for older Australians. These have come about because of the Medicare freeze put in place by the Morrison government. Pensioners know—and they're not fooled—that they can't trust this government to protect their living standards and act to offset rising costs—

      Photo of Slade BrockmanSlade Brockman (President) Share this | | Hansard source

      Senator Dodson, I will ask you to resume your seat. I inform the chamber that the time allotted for the debate on the bill has now expired. In accordance with the resolution agreed earlier today, I will now put the question before the chair and then put the questions on the remaining stages of the bill listed in the resolution. The question is that the second reading amendment on sheet 1588 be agreed to.