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Calculation of Pension Loan

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Last amended 
1 July 2019
Maximum Pension Loans Scheme loan available

    

VEA ?

 

Each fortnightly payment made under the pension loans scheme increases the amount owed by the pensioner under the scheme. Accordingly, ongoing payments can only be made until the balance of the loan reaches the maximum loan available to the person under the scheme.

The maximum loan available to a person is calculated according to a set formula using the age component amount to set a loan limit as a percentage of secured assets.

The maximum loan amount increases on each relevant birthday taking into account the new age component amount and the latest asset valuation on the secured assets.

Calculating the maximum loan

 

VEA ?

 

The maximum loan available to a person under the pension loans scheme can be calculated using the following equation:

 

Maximum loan  =  Age component amount  x  (value of real assets - nominated amount  /  $10,000

Age Component amount

in the case of members of a couple, the ahe component is based on the age of the YOUNGER partner on their last birthday,  Although the age component is drawn froma single person, each partner's share of the value of real assts is used to work out the maximum loan amount. 

Value held for real assets

    

VEA ?

 

If the value of a person's real assets is greater than $10,000; their value is rounded down to the nearest multiple of $10,000. If the value of the real assets is less than $10,000; their value is taken to be nil.  A person's real assers aew to be reduced by the nominated amount.

Effect of nominated amount on maximum loan available

By nominating an amount and thereby excluding that portion of the asset value over which a charge is to be placed, also reduces the maximum loan available because it has the effect of reducing the value of real property.

Example:

A couple aged 72 and 68 years of age, offer property valued at $240,000 as security for a loan to each of them. The property is jointly owned by the couple, and they each have a nominated amount of $45,000. The younger partner's age is used to determine the age component ($2,850 at age 68), and the maximum loan available for each partner is calculated as follows:

·real assets equal $120,000 minus $45,000. After rounding, this comes to $70,000

·maximum loan for each member of a couple equals $2,850 multiplied by ($70,000 divided by $10,000) = $19,950

Note: Where one member of a couple owns a greater than 50% share of the securing property, a 50-50 arrangement will operate where the maximum loan available for an individual applicant of a member of a couple is based on 50% share of the securing property. This arrangement also applies to members of a couple who are qualified for but not receiving income support payments.

 
Assessing the fortnightly Pension Loans Scheme loan rate

    

VEA ?

 

If a person is eligible for payment under pension loans scheme, the loan rate is determined by either:

  • A top-up amount, comprising the difference between:

        * the rate of pension assessed under the normal income / assets test; and

        * 150% of the maximum pension rate including allowances, except remote area allowance, applicable to the person's circumstances, or

  • a lower amount nominated by the pension loans scheme recipient.

A pensioner can choose between a fixed fortnightly loan payment and the maximum rate being 150% of the maximum rat eof service pension.


 

 

 

Section 52ZCA(1) VEA - Maximum loan available under the Pension Loans Scheme

Section 52ZCA(3) VEA - Age component amount table

 

VEA ? (go back)

An age component amount is used for varying ages to set a loan limit as a percentage of the secured assets. The age component amount is intended to take into account the risk of debt exposure of the Commonwealth by reference to a person's current age.  Its aim is to ensure that sufficient real assets are available to repay the loan at the time of recovery.

 

A person's age for the purpose of the table is his or her age at his or her last birthday.  In the case of a couple, it is the age of the younger member of the couple on his or her last birthday. Refer to subsection 52ZCA of the VEA for a full definition. The Age Component Amount table is found in the Social Security (Pension Loans Scheme – Age Component Amount) Determination 2019.

 

 

An age component amount is used for varying ages to set a loan limit as a percentage of the secured assets. The age component amount is intended to take into account the risk of debt exposure of the Commonwealth by reference to a person's current age.  Its aim is to ensure that sufficient real assets are available to repay the loan at the time of recovery.

 

A person's age for the purpose of the table is his or her age at his or her last birthday.  In the case of a couple, it is the age of the younger member of the couple on his or her last birthday. Refer to subsection 52ZCA of the VEA for a full definition. The Age Component Amount table is found in the Social Security (Pension Loans Scheme – Age Component Amount) Determination 2019.

 

 

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.