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5.4.2 Eligibility Criteria for Pension Loans Scheme

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Last amended:  23 February 2009

Eligibility criteria for Pension Loans Scheme

 

VEA →

 

Section 52ZA(1) VEA - Eligibility criteria not a member of a couple

Section 52ZA(2) VEA - Eligibility criteria member of a couple

 

VEA → (go back)

 

To be eligible to participate in the pension loans scheme, a person must be:

  • an income reduced rate, or
  • an adjusted income reduced rate, or
  • an asset reduced rate,
  • (provided at least one of these reduced rates is not a nil rate ie. they must qualify for pension under either the income test or assets test), and
  • able to provide sufficient security to satisfy the Commission that the amount of any debt can be recovered after the person's death.
Income Support Supplement (ISS) and the Pensions Loans Scheme

A person who has reached qualifying age and receiving or is eligible to receive income support supplement is eligible to participate in the pension loans scheme.

War widows or war widowers who are also veterans and the pension loans scheme

A war widow/widower who is also a veteran is eligible to participate in the pension loans scheme. Prior to 20 September 2002, the pension loan payable was limited to a “maximum” of $124.90 per fortnight, however, after 20 September 2002 the maximum pension loan payable will increase in line with the indexation of ceiling rate service pension.

Transfer from the original Pension Loans Scheme to the revised Pension Loans Scheme

    

 

Pension loans scheme recipients with a debt under the original scheme may transfer at any time to the revised pension loans scheme. Interest is calculated at the revised pension loans scheme rate from the first pension payday after the request is lodged. Once a transfer is made to the revised pension loans scheme, it is not possible to transfer back to the original scheme.

Security required for Pension Loans Scheme

 

VEA →

 

Section 52ZF VEA - Assets required as security

Section 52ZL(4) VEA - Costs incurred by the Commonwealth

 

VEA → (go back)

 

Before payment under the pension loans scheme may be considered, a pensioner needs to have sufficient real assets less any guaranteed amount that they are prepared to offer as security against the loan. Only real estate owned in Australia can be used as security for a loan under the pension loans scheme. Any real estate, including the principal home, can be used.

Securing the debt

A debt arising from a pension loan is secured by a statutory charge over the property that the person has offered as security. In practical terms, the Commonwealth lodges a caveat over the property, which prevents the sale of the property until those identified on the caveat are given a hearing. The caveats are lodged by the Australian Government Solicitor in each state. In some states a 'notice of charge' may be issued rather than a caveat. A notice of charge has the same effect as a caveat, in protecting the Commonwealth's interest in the property.

The effect of a mortgage on property

A mortgage on a property which is offered as security for a pension loans scheme debt does not necessarily disqualify a person from participating in the scheme. The mortgage should be taken into account when valuing the person's equity in the real asset, and when calculating the maximum loan available to the person.

Payment for costs involved

The applicant is responsible for the costs to the Commonwealth in placing the charge or caveat on the property. Payment of costs can be made either at the time of registration, or can be added to the debt. If costs are added to the loan debt, they will attract interest in the same way as the loan payments. The person is also responsible for the subsequent cost of removing the charge or caveat. If this occurs after the person's death, their estate will incur the charge.


 

 

For the purposes of Part VI of the VEA, a reference to a veteran is taken to be a reference to:

  • a veteran as defined in subsection 5C(1) of the VEA;
  • a member of the Forces as defined in subsection 68(1) of the VEA; or
  • a member of a Peacekeeping Force as defined in subsection 68(1) of the VEA.

For the purposes of Part VII of the VEA, according to subsection 5C(1), veteran means a person (including a deceased person):

  • who is taken to have rendered eligible war service, or
  • in respect of whom a pension is, or pensions are, payable under subsection 13(6) and
  • in Part III and Part VIIC of the VEA includes a person who is:

 

 

Currently, the pension age for a veteran is 60 years of age (VEA 5QA).

The pension age for a non-veteran is determined by the table below:

Date of birth (both dates inclusive)

Age Pension age

1 July 1952 to 31 December 1953

65 years and 6 months

1 January 1954 to 30 June 1955

66 years

1 July 1955 to 31 December 1956

66 years and 6 months

On or after 1 January 1957

67 years

 

A person's 'partner' is someone who is a member of a couple with that person.

Currently, the pension age for a veteran is 60 years of age (VEA 5QA).

The pension age for a non-veteran is determined by the table below:

Date of birth (both dates inclusive)

Age Pension age

1 July 1952 to 31 December 1953

65 years and 6 months

1 January 1954 to 30 June 1955

66 years

1 July 1955 to 31 December 1956

66 years and 6 months

On or after 1 January 1957

67 years

 

A war widow/widower is generally a person who immediately before their partners death, was the partner of, or was legally married to:

Refer to 5E(1) of the VEA for the full definition.

 

 

Qualifying age is defined in section 5Q(1) of the VEA and is equivalent to the pension age for a veteran which is described in section 5QA VEA as:

  •       60 years for a male,
  •       for females subject to age equalisation (refer to the table in section 5QA VEA).

A service pension is an income support payment broadly equivalent to the social security age and disability support pensions. It may be paid once a veteran or partner has reached the nominated age or is incapacitated for work.

ISS is an income support payment that may be paid to eligible war widows and widowers under the VEA and persons receiving wholly dependent partners' compensation under the MRCA, and who satisfy the means tests. It is an indexed rate, increased twice-yearly in March and September in line with changes to the cost of living and/or average wages. Income Support Supplement (ISS) legislation commenced on 20 March 1995. It is a payment created to replace the ceiling rate income support age, carer, wife and disability support pensions, paid to war widows/widowers by Centrelink.

 

 

One element of the means test for income support pensions whereby the rate of pension payable to a pensioner reduces progressively as their income increases above a certain threshold known as the income free area (IFA).

 

 

One element of the means test for income support pensions whereby the rate of pension payable to a pensioner reduces progressively as their assets increase above a certain threshold known as the assets value limit (AVL).

According to Section 179 of the VEA, the Commission is a body corporate under the name of Repatriation Commission.

 

 

The ceiling rate of service pension and income support supplement (ISS) is applied to all war widows/widowers when assessing the rate of pension. This amount was previously frozen at $124.90 per fortnight, however, since legislation was introduced in September 2002, is now indexed twice yearly in line with percentage increases in the maximum rate service pension. A higher ceiling rate can apply, however, in the following cases:

If a person:

  • became a war widow/widower-pensioner before 1 November 1986,

  • has continually received service pension, social security pension or ISS since that date, and

  • the rate of pension immediately before that date was more than $120.10

in such a case the ceiling rate is equal to the pre-November 1986 rate plus 4%.

If a person:

  • is a person to whom ISS is payable,

  • is not permanently blind, and

  • whose Part II or IV pension is [glossary:compensation reduced:DEF/Compensation reduced pension],

the ceiling rate is the sum of the ceiling rate as calculated above and the amount of the reduction in the Part II or Part IV pension. The maximum ceiling rate cannot exceed the maximum rate of single service pension. For ceiling rates refer to SCH6-A4 to A9 of VEA. The amount of increase to the ceiling rate pension under Part II or Part IV is worked out by using the formula in SCH6-A9 of the VEA.

 

 

Real Assets includes any real estate of the person in Australia (including the principal home) nominated by the person as security but excluding any specified property which the person wishes to exclude. Refer to subsection 52ZAAA(1) for a full definition.

 

 

A guaranteed amount is the minimum amount (if any) that a pension loan scheme participant or their estate is entitled to retain from the proceeds of the enforcement of a charge on their assets by the Commonwealth. Any guaranteed amount is to be specified by the participant in the scheme.