Introducing the new HEAS lump sum option and how it will work

As announced in the 2021 Federal Budget and in response to Pension Boost’s advocacy for seniors, from 1 July 2022 the Home Equity Access Scheme (HEAS) will feature a lump sum option. Many seniors we talk to tell us that a lump sum option would greatly assist with things like repaying credit card bills, repairs to the home, maintenance on the car, or helping out with unexpected large bills that may come in.

The fortnightly HEAS payments often can’t assist with these sort of bigger ticket expenses and the minimum loan size in the commercial reverse mortgage market is often more than required.

Here’s how the new HEAS lump sum option will work

The maximum you can access in any year is 50% of the annual full age pension rate.

The current HEAS lump sum maximums are (as at 20 March 2022):

• Couples: 50% x $38,708.80 = $19,354.40
• Singles: 50% x $25,677.60 = $12,838.80

Importantly, any lump sum that you choose to access is treated as an advance of your fortnightly HEAS payments for the next year. The lump sum is not in addition to the regular fortnightly HEAS payments.

You don’t have to draw the maximum amount and you can access any amount up to the maximum. You can also access the lump sum option in up to two payments in a twelve month period.

Some examples:

• A full age pension couple on the maximum HEAS payment level wishes to access $13,000 as a lump sum to fund some maintenance projects on their home. Their fortnightly HEAS payments of $744.40 will be reduced by $500 ($13,000 divided by 26) for their next 26 fortnightly payments (one year) so that they receive $244.40 per fortnight plus the lump sum of $13,000 to make the total HEAS payments in that year $19,354.40.
• A single full age pensioner on the maximum HEAS payment level wishes to access the maximum lump sum of $12,839 to pay for some medical bills. This will mean that their fortnightly HEAS payments of $493.80 will be reduced to nil ($12,839 divided by 26 equals $493.80) for the next 26 payments.
• A self funded retiree couple on the maximum HEAS payment level wish to access the maximum lump sum of $19,354 to buy a new car. Their fortnightly HEAS payments of $2,233.20 will be reduced by $744.40 ($19,354.40 divided by 26).

What are the consequences of accessing the lump sum payment?

By drawing a lump sum your HEAS loan balance will immediately increase by the amount to choose to access and as a result additional interest will accrue on your HEAS loan. As the lump sum is an advance payment offset by reducing your future fortnightly payments the difference in loan interest accrued in a 12 month period is not that material (we estimate the difference in the HEAS loan balance to be less than 2% for full age pensioners drawing both the maximum HEAS fortnightly payment and lump sum).

To be eligible you also need to have sufficient capacity within your current HEAS Maximum Loan Amount for a lump sum option request to be approved.

How to access the lump sum option

The lump sum option comes into effect from 1 July 2022.

We have asked Centrelink to advise us how the process will work for existing HEAS participants (new participants will be able to request it in their HEAS application). We fully expect that the existing HEAS Variation form will be modified to suit the lump sum option and we understand that there will also be an online facility.

The lump sum access process is yet to be confirmed and we will update clients once we have further information.

In the meantime, if you are interested in learning more about the new HEAS lump sum option register your interest by clicking the button below and one of our friendly HEAS Specialists will contact you and answer any questions you have.