Retirees seeking access to the expanded Pension Loans Scheme a reverse mortgage managed by the government will likely be hard-pressed finding someone who can give advice on how the scheme stacks up against private-sector reverse mortgages.
The government scheme has advantages over private-sector reverse mortgages, such as a lower interest rate and no fees.
From the middle of next year, providing legislation is passed by Parliament, access to the scheme will be open to anyone who is of pension age.
Apparently the link is the Sydney Morning Herald and is 'subscriber-only'.
I have tried to find an alternative link/article/newspaper to the story but the only one being thrown up is the SMH link as above.
Is the article a statement that "Retirees seeking access to the expanded Pension Loans Scheme a reverse mortgage managed by the government will likely be hard-pressed finding someone who can give advice on how the scheme stacks up against private-sector reverse mortgages." ?
Therefore, is the gist of the article advising access to the Pension Loans Scheme is fraught with lack of professional advice?
Can you elaborate on just what the article is please?
Cheers - John
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Jihn, for some reason I was able to open the link.
Here's a C&P of it's content
Retirees seeking access to the expanded Pension Loans Scheme a reverse mortgage managed by the government will likely be hard-pressed finding someone who can give advice on how the scheme stacks up against private-sector reverse mortgages.
The government scheme has advantages over private-sector reverse mortgages, such as a lower interest rate and no fees.
From the middle of next year, providing legislation is passed by Parliament, access to the scheme will be open to anyone who is of pension age.
If the expanded government reverse mortgage proves popular, many retirees will want to receive financial adviceCREDIT:JAMES DAVIES
Thats likely to see a spike in inquiries from retirees looking to access the scheme. Louise Biti of Aged Care Steps points out there may well be a bottleneck when it comes to getting advice as most financial advisers are not allowed to recommend reverse mortgages.
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To be able to give specific recommendations on reverse mortgages, they need to be operating under a credit licence. While some financial planners are covered by a credit licence, most are not.
That puts retirees seeking personal financial advice on the government scheme and how it compares with the private sector reverse mortgages with nowhere to go.
They may want to check if there is a better way of freeing up some cash like downsizing to a smaller home, for example.
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Government reverse mortgage expanded
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At the moment, the scheme is limited to borrowing an amount to top up the part pension to the equivalent of the full pension.
From the middle of 2019, the government wants to expand the scheme so that anyone of pension age, whether full pensioners, part pensioners and self-funded retirees, will be able to borrow against their house to create an income stream that is up to 50 per cent higher than the full pension, including supplements.
That means opening the scheme to retirees with more complex financial circumstances than the small number who access the scheme now.
There are some downsides to the government scheme. For example, the loans can only be taken as an income stream when most people who take private-sector reverse mortgages prefer to take lump sums.
Those who are serious about accessing the government scheme have to see a Centrelink financial information officer who makes sure the applicant understands the implications of the scheme.
These include that the loan will be repaid when the house is sold either on the death of the borrower or when the house is sold to pay for age care. The debt can balloon as there are no repayments and interest accrues on the interest.
Retirees need to be fully aware that when their house is sold, a good part of the house proceeds may go to repaying the loan, leaving less to fund age care or to pass onto heirs.
Louise Biti says a possible solution is for the government to provide an exemption to financial planners so they can give advice on the government scheme without the need to be covered by a credit licence.
Cheers
Jim
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Want advice on the government's reverse mortgage? Tough
By John Collett
19 June 2018 12:41pm
Retirees seeking access to the expanded Pension Loans Scheme a reverse mortgage managed by the government will likely be hard-pressed finding someone who can give advice on how the scheme stacks up against private-sector reverse mortgages.
The government scheme has advantages over private-sector reverse mortgages, such as a lower interest rate and no fees.
From the middle of next year, providing legislation is passed by Parliament, access to the scheme will be open to anyone who is of pension age.
If the expanded government reverse mortgage proves popular, many retirees will want to receive financial adviceCredit:James Davies
Thats likely to see a spike in inquiries from retirees looking to access the scheme. Louise Biti of Aged Care Steps points out there may well be a bottleneck when it comes to getting advice as most financial advisers are not allowed to recommend reverse mortgages.
To be able to give specific recommendations on reverse mortgages, they need to be operating under a credit licence. While some financial planners are covered by a credit licence, most are not.
That puts retirees seeking personal financial advice on the government scheme and how it compares with the private sector reverse mortgages with nowhere to go.
They may want to check if there is a better way of freeing up some cash like downsizing to a smaller home, for example.
Related Article
Government reverse mortgage expanded
At the moment, the scheme is limited to borrowing an amount to top up the part pension to the equivalent of the full pension.
From the middle of 2019, the government wants to expand the scheme so that anyone of pension age, whether full pensioners, part pensioners and self-funded retirees, will be able to borrow against their house to create an income stream that is up to 50 per cent higher than the full pension, including supplements.
That means opening the scheme to retirees with more complex financial circumstances than the small number who access the scheme now.
There are some downsides to the government scheme. For example, the loans can only be taken as an income stream when most people who take private-sector reverse mortgages prefer to take lump sums.
Those who are serious about accessing the government scheme have to see a Centrelink financial information officer who makes sure the applicant understands the implications of the scheme.
These include that the loan will be repaid when the house is sold either on the death of the borrower or when the house is sold to pay for age care. The debt can balloon as there are no repayments and interest accrues on the interest.
Retirees need to be fully aware that when their house is sold, a good part of the house proceeds may go to repaying the loan, leaving less to fund age care or to pass onto heirs.
Louise Biti says a possible solution is for the government to provide an exemption to financial planners so they can give advice on the government scheme without the need to be covered by a credit licence.
There is a difference between recommending a reverse mortgage and explaining how a reverse mortgage works. As far as I know there is nothing preventing any financial professional (advisor, accountant lawyer etc) explaining the pros and cons of a reverse mortgage from the private sector or the government. As mentioned Centrelink also provide a Financial Information Service
