How the Home Equity Access Scheme can help you live in your home for longer

When the Government announced the major changes to the Home Equity Access Scheme (HEAS), previously known as Pension Loans Scheme (PLS), in the 2018 Federal Budget, one of the major reasons in support of expanding the HEAS was to assist seniors to continue living in their homes for longer. This policy position is supported by research that seniors prefer to live in their homes rather than downsizing, as a way to release equity. The resultant dislocation caused by moving to a new area away from their familiar surroundings and network of friends is stressful. Downsizing may also have an adverse impact on seniors Age Pension entitlements.

Whilst not being forced into downsizing is an obvious benefit, one that hasn’t received much airtime is how the HEAS could assist other Government policies targeting the same outcome – keeping seniors living in their homes for longer. For example, the policy of delivering more aged care and related support services in-home, either on a user paid basis and/or subsidized based on an ACAT need assessment.

The regular fortnight payment structure of the HEAS is ideally suited to assisting with funding in-home care packages. By way of example take Ruth, who is an 80 year old widower receiving the single Full Age Pension. Whilst Ruth does not require residential care, she is in need of certain support services to remain safe, secure and healthy in her home.

Under the HEAS, Ruth can receive up to an additional $472 per fortnight on top of her Centrelink pension to help her better make ends meet by releasing some of the equity she has in her $500,000 house. Ruth is planning on using $172 per fortnight to meet her regular bills but is interested to learn how government funded Home Care support can be funded with the residual $300.

We asked Alteris Lifestyle and Care, who specialise in helping families make a confident and informed choice regarding their aged care options, to explain the costs of a Home Care package and how the HEAS could support Ruth’s enhanced budget. Alteris Lifestyle and Care highlighted the following.

To access government home support it’s important for a person to be assessed as being eligible. You can get assessed by contacting the My Aged Care Team online at myagedcare.gov.au or by phone on 1300 200 422. The outcome of that assessment will identify the level of home care support you are eligible to receive.

The first cost is known as the basic daily fee. This fee is payable whilever a package has been assigned to you, even if you don’t receive a service on that day. It adds to the value of the home care package and thus enables the provider to increase the services being offered.

Please note: Amounts are current as at 20 September 2020 and are indexed each March and September in line with changes in the Age Pension.

The second cost is an income tested care fee. This is a co-contribution to help cover the costs of the service. It is not payable by everyone as it is assessed based on the individuals assessed level of income, and it is subject to a yearly and lifetime cap. As Ruth is receiving the Full Age Pension, she will not be required to pay an income tested fee, however if she was in receipt of a part Age Pension or no pension, specialist aged care advice will help determine the amount payable and the options to help minimise this fee.

As a result of the HEAS, Ruth would have more than enough to cover all levels of Home Care Package daily fees with funds to spare for some of life’s little luxuries.

Ruth’s daughter Elizabeth was very supportive of getting the care her mum required and asked us to show her and Ruth what the financial implications of accessing the HEAS were.

However, Ruth was worried about what she’d be leaving to Elizabeth. So, we ran Ruth’s scenario through our HEAS Calculator which demonstrated the following:

Base case:

Our assumptions were that:

• Ruth would draw the maximum HEAS payment each fortnight
• There would be inflation of 2.5% pa
• The property growth rate would be 3% pa¹
• The HEAS interest rate would remain at 4.5% pa

Ruth and Elizabeth were also thinking that Ruth may need access to residential care within the next 10 years and were concerned at what would happen if property markets were poor. Would there be enough equity for Ruth to access residential care if needed?

Downside case: amended property growth rate (nil); HEAS Interest rate (5.5% pa)

The downside scenario gave Ruth and Elizabeth some comfort that even if the property market had no growth and rates were 1% higher, there would still be $300,000+ equity towards funding residential care at age 90, should it be required.

If property markets were more positive, then there would be more estate available for Ruth to leave to Elizabeth – which is shown in the appendix below for those who look at life with a glass-half-full lens.

What Ruth’s story highlights is that the revised HEAS not only plays a supporting role in the Government’s policy of assisting seniors to age in their homes, more relevantly, it demonstrates how seniors who are in need of care and assistance can fund the help they need by releasing some of the equity in their home.

If you’re in a similar situation to Ruth and would like us to run the numbers for you so you know what your options are when it come to the HEAS, contact us today. You can contact us either via phone 1300 BOOSTNOW (1300 266 786) Mon-Fri, 9am - 5pm or click on the button below to be taken to our contact page where you can fill in our online enquiry form (you’ll find it at the bottom of the page).

* To contact Alteris Lifestyle and Care click here

¹ The Australian average residential property growth rates over the 25 years 1993 - 2018 were 6.8% pa for houses and 5.9% pa for apartments (source: Aussie Home Loans / Corelogic 25 Years of Housing Trends Report https://www.aussie.com.au/home-loans/property-reports/25years.html. Whilst historic data is interesting, past performance is not an indicator of future performance.

Appendix:

Upside case: Property growth rate of 5.0% pa; HEAS interest rate of 5.0% pa