Pension Loan Scheme replaced by the Home Equity Access Scheme

By William Truong, Technical Services Manager

Since 1 January 2022, the Government’s Pension loan scheme has been rebranded as the ‘Home Equity Access Scheme’ (HEAS).

This scheme allows senior Australians to access the equity in their real estate by borrowing from the government, against the value of their property to supplement their retirement income. Applicants don’t have to be receiving income support from the government to qualify. However, one necessary condition is that they have appropriate and adequate insurance covering their secured real asset/s.

The feature of this scheme is that borrowers can remain living in their family home without having to sell it and they do not have to repay the loan during its term. Retaining their home may carry Centrelink concessions such as main residence exemption and may have sentimental and estate planning advantages.

This scheme provides a cashflow solution for many cash strapped retirees. However, this does mean the loan amount will increase over time and will need to be repaid when the property secured by the loan is sold or from the person’s estate after they have passed away.

Since 1 January 2022, the interest rate on this loan has dropped from 4.5% to 3.95% and is compounded on the outstanding loan balance each fortnight.

Changes to the scheme from 1 July 2022

The Social Services and Other Legislation Amendment (Pension Loans Scheme Enhancements) Bill 2021 has been passed by Parliament, that allows more flexibility and guarantee, with the following changes:

No negative equity guarantee

The introduction of a no negative equity guarantee will mean that those participating in the scheme with an outstanding loan balance on or after 1 July 2022 will not have to repay more than the equity they have in the property used to secure the loan. This will protect the borrower and their estate in case the value of their property falls. The guarantee will extend to both existing and new participants of the Scheme. 

Pension Loans Scheme advance payments

Currently, the scheme doesn’t allow access to lump sums, and only allows for fortnightly amounts of the combined pension and loan payments of up to 1.5 times the maximum pension rate. 

From 1 July 2022, borrowers will be able to access lump sum advance payments up to 50% of the maximum annual rate of Age Pension either as a single lump sum or two instalments within a year. This will provide flexibility for borrowers, which may be used where a large one-off expenditure is required.

If a lump sum is drawn, it is assessed by Centrelink based on any unspent funds remaining as follows: 

  • The first $40,000 of any unspent amount is an exempt asset for 90 days from the date of withdrawal. Any amount exceeding $40,000 is immediately asset tested (unless invested in an exempt asset) 
  • After 90 days if the person has not spent the loan, the amount is an assessable asset. 
  • The full loan is subject to deeming provisions from the date of receipt of the loan while it is held as a financial investment.

 Case study:

Mandy is 70-years old and qualifies for the age pension, but due to her level of assets is not entitled to receive an age pension. Mandy has a securable property, being her home with sufficient equity and adequate and sufficient insurance on it, she is able to borrow under the Home Equity Access Scheme.

  • The maximum single Age pension is currently $987.60 per fortnight ($25,677 per year – as at 20 March 2022). 
  • Mandy accesses the scheme, using her property as security, and can nominate to receive a loan of up to 150% of the Age pension limit, being $1,481.40 per fortnight ($38,516 per annum).
  • Alternatively, if she wants to access the loan as a lump sum, the maximum advance available to her is:
    $987.60 x 50% x 26 (fortnights) = $12,838.80 per annum.

 Under the changes, she is able to access up to 2 advances in any 26 fortnight period, however the amount available as a second advance will be reduced by the value of the first advance. This ensures no more than the capped 50% amount can be taken as advance payments.

There is age-based loan-to-value ratios which will continue to apply when determining the maximum advance amount available to a participant. This means the actual advance a borrower is eligible to receive may be less than the maximum allowable advance described above.


With added flexibility from lump sums and extra protection on equity from the property used for security, the HEAS provides a further option for clients to assist with their cashflow. 

For further details on the HEAS, please contact ‘Services Australia’.

More information

If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.

The information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.