Home equity scheme cleared as advice option

The Centrelink Home Equity Access Scheme has been identified as a possible area of advice for advisers, having previously been thought of as a credit product.

The scheme, formerly known as the Pensions Loans Scheme, allowed older Australians to receive a voluntary non-taxable loan and use the equity in their property as security.

It was formerly restrictive in who could access it but recent changes meant it was now more accessible, including retirees who were otherwise ineligible for an Age Pension benefit.

Michael Miller, financial planner at Capital Advisory, sought clarification from the Australian Securities and Investments Commission (ASIC) as to whether this was an option that financial advisers could explore in clients’ retirement plans.

Previously, he said, advisers were cautious about the product and the restrictions and unsure whether they could advise on them. He felt the Scheme would be suitable for retired clients who were “asset rich but cash poor” and who wanted to access assets tied up in their property.

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“Many Australian Financial Service License (AFSL) holders had expressed caution about advising directly on the scheme, as it may have required an Australian Credit License (ACL) which was more typically held by mortgage brokers and other finance industry participants, than financial planners,” he said.

In response, ASIC stated: “As the Scheme is provided for under statute and not under a contract, these debts are not considered ‘credit contracts’ under the National Credit Act and therefore not regulated under the National Credit Act.

“We consider that financial advisers can advise on the Scheme without required an ACL, notwithstanding their functional equivalence to reverse mortgages that are regulated under the National Credit Act.”