The retirement home loan meme as rickety as a house of cards

Significant changes to the federal government’s pension loan scheme took effect on January 1 – but replacing the aged pension with an interest-free loan against the value of retirees’ homes is not one of them.

The meme shared on Twitter and Facebook (here and here) claims the government wants retirees to “lock up” their homes to pay for basic expenses, such as groceries and electricity bills.

The Facebook posts follow the December announcement of changes to the government’s pension loan scheme. The main changes are that from January its name was changed to Home Equity Access Scheme and its interest rate was reduced from 4.5% to 3.95%.

The voluntary scheme allows older pensioners to receive a fortnightly payment to supplement – ​​not replace – pension payments. Self-funded retirees can also use the scheme to earn additional income. Loan repayments are secured by the equity in the retirees’ home.

The Morrison government extended access to the scheme to all older Australians in the 2019/2020 budget – previously it was only available to those not on full pension.

But the meme characterizes the scheme as an interest-free involuntary loan to replace the pension.

“The Coalition is considering paying all retirement home owners the retirement pension as an interest-free loan against the value of their home to help repair the budget,” the text reads.

“They’ve worked their whole lives to pay for their homes only to hand them over to an incompetent government that spends money like drunken sailors and can’t even balance its own books.”

A spokeswoman for Social Services Minister Anne Ruston said AAP Fact Check in an email that the meme is misleading and intentionally designed to scare older Australians.

“I want to assure all retirees that the Morrison government’s priority is to give older Australians choice and control over their retirement and these changes to the Voluntary Home Equity Access Scheme do just that,” he said. said the spokeswoman.

The minister says the lower interest rate reduces borrowing costs and allows people to use the plan longer.

Colin Zhang, from the Department of Actuarial Studies and Business Analysis at Macquarie Business School, who co-authored an explainer on the pension loan scheme for The Conversation, also argues that the meme’s claim is incorrect.

“This home equity access program is a special type of reverse mortgage offered by the government that is not interest-free,” Dr. Zhang said. AAP Fact Check by email.

“In other words, people can use this scheme to cash in part of their home ownership for an additional pension-like income stream (with a cap). Participation in this scheme will have no impact ( or will not replace) your retirement income.”

Lobby group National Seniors Australia says it has not come across any plans for senior pension changes, according to the meme.

“No government or opposition has suggested that you replace the pension with equity from your home,” chief lawyer Ian Henschke said. AAP Fact Check in a telephone interview.

“I have not seen any information whatsoever that the pension will be replaced by the home equity levy system. If this is a concerted campaign, it is misinformation at best and mischief at worst.

At the Royal Commission on Aged Care in September 2020, former Treasurer Peter Costello urged the Morrison government to consider an expanded loan scheme to fund aged care, offering the option of taking out a loan backed by the family home that would be sold when they died. .

A Tweeter as of October 2021, shares Mr. Costello’s comments alongside the retirement meme, calling it a “liberal national death tax”.

A blog post on the Australian Parliament website says the original pension loan scheme was established in 1985 by the Hawke Labor government. The Keating government expanded the scheme in 1996. Published in 2015, the article notes proposals to expand the scheme to cover elderly care costs or allow the family home to be included in the means test of the pension – none of these proposals having succeeded.

The asset test for the pension includes most real estate assets, but “generally does not include your primary residence”, according to Services Australia.

The verdict

The Australian government does not plan to pay all retired homeowners the superannuation as an interest-free loan against the value of their home. The claim misrepresents what is now called the Home Equity Access Scheme. The government, an academic and an advocate for the elderly say the scheme aims to increase retirement income, but does not replace the pension. The loan is not interest free.

False – The request is incorrect.

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