Interest rates for loans

We charge an annual interest rate of 4.5% that compounds each fortnight on the outstanding loan balance.

The outstanding loan balance is the amount we’ve loaned you plus costs and interest accrued, minus repayments you’ve made.

We add interest to the outstanding loan balance each fortnight until you repay the loan in full.

The longer you take to pay a loan back the more interest you’ll accrue and have to pay back.

You should get independent financial advice before making any financial decisions.

Use the pension loan calculator to see how interest will accrue on your loan if you apply for one.

Example of loan balance calculation

George gets his first fortnightly loan payment of $750 from the Pension Loans Scheme. Interest accrues straight away. We charge interest on this again every 14 days.

At the end of the first fortnight, George’s loan balance is $751.29. George then gets another $750 loan payment. We charge interest on the total loan balance, including interest charged on previous loan payments.

At the end of the second fortnight, George’s outstanding loan balance is a total of all of these. His:

  • first loan payment plus interest, which totals $751.29
  • second loan payment, which is $750
  • interest on the balance of $1,501.29, which is $2.59.

That makes his new outstanding loan balance $1,503.88.

At the end of the third fortnight, George gets another $750 loan payment. We charge interest on his outstanding loan balance. This means George's outstanding loan balance is now $2,257.78. That’s a total of both his:

  • outstanding loan balance of $1,503.88 plus the third payment of $750, which totals $2,253.88
  • interest on the loan balance, which is $3.90.

The interest will continue to accrue in this way each fortnight until George pays off his debt. This applies even after he reaches his maximum loan amount and stops getting payments.

This means that George’s loan will increase every fortnight. The longer he takes to pay off the loan, the more he’ll need to pay back.

Examples of compound interest

These examples use the current interest rate of 4.5% and no one is making repayments to their loan.

After 5 years

John gets a loan under the scheme of $6,500. He chooses to get a loan amount of $50 each fortnight.

After 5 years, John’s loan balance is $7,294.89. This includes the compound interest he’s accrued over the 5 years of $794.89.

After 10 years

Suzie gets a loan under the scheme of $195,000. She chooses to get a loan amount of $750 each fortnight.

After 10 years, Suzie’s loan balance is $246,430.09. This includes the compound interest she’s accrued over the 10 years of $51,430.09.

After 15 years

Doug gets a loan under the scheme of $526,500. He chooses to get a loan amount of $1,350 each fortnight.

After 15 years, John’s loan balance is $752,352.05. This includes the compound interest he’s accrued over the 15 years of $225,852.05.

Page last updated: 5 July 2021