Boost your retirement income without selling your family home

Just like the Commonwealth Seniors Health Card, most older Australians don’t know about the Pension Loans Scheme. Find out how the PLS can help you pay for home care and then take our poll at the end of the article.

A recent Macquarie University study showed increased home care significantly reduces both social isolation and hospital admissions.

However, for many seniors wanting home-based support and taxpayer subsidised services, including home care packages, it can be expensive.

Many older people end up having a service provider visit for just a few hours a week.

But there is a way to afford more hours. It’s called the Pension Loans Scheme.

By using the equity in your property (home or any other property) older Australians can not only stay in their home but also get more hours of personal care.

Given around 75 per cent of older Australians are home and/or property owners, using the home to generate income to spend on health care as we get older makes sense.

Keep reading to learn more about the Pension Loans Scheme and take our quick poll at the end of the article.

A scheme for all

You might be forgiven for thinking that the Pension Loans Scheme (PLS) is just for pensioners.

However, changes to eligibility for the PLS, from 1 July 2019, means that ALL eligible Australians of pension age who own property can now drawdown part of the equity in their property to generate higher income.

Notably, this can be used to fund care in their own home. The maximum amount available is 150 per cent of the pension per year paid fortnightly. For a couple this is currently $55,520 annually and for a single it is $36,828.

Under the scheme, the government uses the equity in your home to loan you a fortnightly payment. The loan is ultimately recovered from your estate unless you pay this off through other means.

Importantly, PLS payments do not count towards the pension income test or affect the aged care means test. Amounts received from a PLS loan are also non-taxable.

The current rate of 4.50 per cent was lowered from 5.25 per cent from 1 January 2020 after campaigning by National Seniors.

Here’s an example of how it works

Bob and Alison Mayer* are 87 and 84 and they’re on a full Age Pension. They own their own home outright. It’s an older home on a large block and has been recently valued at $780,000. Their combined Age Pension income is currently $1,423.60 per fortnight ($37,014 per year).

Alison has dementia and receives a level four package with a dementia supplement. Bob provides Alison’s care needs together with the support of 11 hours per week from a provider.

Alison’s care needs have increased significantly, and Bob is both exhausted and stressed. The children have suggested it is now time he looked at residential care for Alison. Bob is adamant he wants both of them to remain at home for as long as possible.

Bob has rung My Care Solution and asked to meet with him to discuss his options.

My Care Solution suggested he seek advice from Centrelink and/or his accountant to source additional funds from the equity/value of his home.

As a result of the changes to the PLS from 1 July 2019, Bob and Alison are now able to “drawdown" up to $18,560 per year (paid fortnightly with their pension) without impacting on their fortnightly pension payments.

Bob decides to draw down $16,000 per annum# ($615.38 per fortnight) to cover the additional costs of private care by topping up their government funded care package.

* Not their real names

# The annual loan amount is increased by 2.5% each year to account for the affect of inflation on the cost of services


This is a win-win for the borrower and for the government as it could generate budget savings, as less people will need to go into hospital or higher cost residential care.

The arrangement also provides more personal care hours than in an aged care home (4 hours per day compared to an average of less than 3 in a residential care home)!

It’s worth noting that Bob and Alison, over 5 years, would build up a loan of $94,765. Compound interest over five years would be $10,664 (this includes a loan establishment fee^).

If the PLS rate went down to 3.25 per cent as we think it should the interest over 5 years would be only $7,717.

If you are thinking seriously about this option, you should first check out the Pension Loans Scheme page on the Services Australia website.

We also recommend that you seek independent financial advice before making any final decisions.

^ As loan establishment fees vary across different states and territories, this calculation uses an average of $600

Fighting for a fairer retirement system

The pension loan scheme rate is currently 4.50 per cent. However, we’re campaigning to have it dropped further to create a fairer system that better reflects current interest rates.

If you are interested in helping to fight for a fairer retirement system, check out and sign up to our Fairness in Retirement Income campaign.

Have your say