An aerial shot of houses in suburban Sydney
Social media posts claim aged pensioners may have to enter a loan scheme on their home. Image by Sam Mooy/AAP IMAGES

Aged pension home loan meme as rickety as a house of cards

AAP FactCheck January 13, 2022

The Australian government wants to pay all retired home owners the aged pension as an interest-free loan against the value of their home.


False. A voluntary Pension Loan Scheme exists but does not replace the pension and is not interest-free.

Significant changes to the federal government’s Pension Loans Scheme came into effect on January 1 – but replacing the aged pension with an interest-free loan against the value of retirees’ homes isn’t one of them.

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

The Facebook posts follow an announcement in December of changes to the government’s Pension Loans Scheme. The main changes are that from January its name changed to the Home Equity Access Scheme and its interest rate fell from 4.5 per cent to 3.95 per cent.

The voluntary scheme allows aged pensioners to draw a fortnightly payment to top up – not replace – pension payments. Self-funded retirees can also use the scheme to obtain extra income. The loan payments are backed by the equity in the retirees’ home. 

The Morrison government expanded access to the scheme to all senior Australians in the 2019/2020 Budget – previously it was only accessible to those not on a full pension.

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

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

“Worked all their lives to pay off their homes only to hand over to an incompetent govt that spends money like drunken sailors and can’t even balance it’s (sic) own books.”

A spokeswoman for Social Services Minister Anne Ruston told AAP FactCheck 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 providing older Australians with choice and control in their retirement and these changes to the voluntary Home Equity Access Scheme do exactly that,” the spokeswoman said.

The minister says reducing the interest rate lowers borrowing costs and allows people to use the scheme for longer.

Colin Zhang, from the Department of Actuarial Studies and Business Analytics at the Macquarie Business School, who co-authored an explainer on the Pension Loans Scheme for The Conversation, also says the meme’s claim is incorrect.

“This Home Equity Access Scheme is a special type of reverse mortgage offered by government which is not interest-free,” Dr Zhang told AAP FactCheck by email.

“In other words, people can use this scheme to cash out part of their house ownership for an additional pension type income stream (with a cap). Participating in this scheme will not impact (or replace) your pension income.”

Lobby group National Seniors Australia says it has not encountered any plans for the aged pension changes the meme claims.

“No government or opposition has suggested you replace the pension with equity from your home,” chief advocate Ian Henschke told AAP FactCheck in a phone interview.

“I’ve seen no information whatsoever that the pension would be replaced by the home equity drawdown scheme. If it’s a concerted campaign, it’s misinformation at best and mischief-making at worst.”

At the royal commission into aged care in September 2020, former treasurer Peter Costello urged the Morrison government to consider an expanded loan scheme to fund aged care, giving the option of taking out a loan secured against the family home that would be sold when they died. 

A tweet from October 2021 shares Mr Costello’s comments alongside the pension meme, calling it a “Liberal National Death Tax”. 

A blog article on the Australian Parliament House website says the original Pension Loans Scheme was created in 1985 by the Hawke Labor government. The Keating government broadened the scheme in 1996. Published in 2015, the article notes proposals for expanding the scheme to cover aged care costs or allow the family home to be included in the pension means test – neither of which eventuated.

The assets test for the pension includes most real estate assets, but “generally doesn’t include your principal home”, according to Services Australia.

The Verdict

The Australian government is not considering paying all retired homeowners the aged pension as an interest-free loan against their home’s value. The claim misrepresents what is now called the Home Equity Access Scheme. The government, an academic and a seniors advocate say the scheme is intended to boost pension income, but doesn’t replace the pension. The loan is not interest-free.

False ÔÇô The claim is inaccurate.

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