The global credit crisis caused the failure of a number of banks worldwide and this led the Rudd government to guarantee bank depositors’ money.  This had the unintended consequence of causing a shift of funds to the banks and an avalanche of withdrawals from non bank institutions running mortgage and property trusts. These trusts, as the name implies invest in mortgages and property which by their nature are not liquid – borrowers have to repay the mortgages and properties need to be sold and proceeds turned into cash.

As a result, whilst the majority continue to make income payments, these trusts were frozen for redemptions. This caused considerable hardship, particularly to self funded retirees who depended on access to pay their bills.

The Treasurer Wayne Swan responded by telling those affected to contact Centrelink – a comment that was met with derision. But Centrelink may be able to assist.

Centrelink has already re-valued investments to take into account the reduction in the value of assets. This may lead to an increase in pension where a person is assessed under the assets test. But further help is also available.

People with little or no entitlement to a pension, because of their assets, who as a result of have funds frozen are in severe financial hardship, can be assisted by the social security hardship provisions. If the qualifying conditions are met, a person can gain additional pension income.  Additionally, those who are not eligible for a pension because of either the assets or income tests (but not both), can access the capital tied up in the frozen funds via the Pension Loan Scheme. This scheme allows a person to obtain a pension loan at a low rate on interest which is secured against their assets.  

 

If you are affected by having funds frozen, and are in receipt of a pension or believe that you might be entitled to one, you should contact your nearest Centrelink office for assistance.

 

POSTED: 07-Nov-2008

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