Retirement Villages VS Aged Care Facilities
Many people will make private arrangements for their retirement living. They may stay in their own homes, perhaps with help from family or other carers. Some will move into a retirement village and retain their independence. For others, a time will come when they need a higher level of care.
I thought I would point out a particular matter of concern amongst senior citizens currently, following some recent bad press about retirement villages.
Confusion – Retirement Villages are not the same as Nursing Homes
Recently there was much media attention on AVEO who is a large provider of retirement village accommodation. The concerns were related to ongoing costs, exit fees, lack of nursing, complicated contracts etc. To add to the confusion a high profile finance journalist wrote a story in an attempt to clarify cost structures, but clearly got confused themselves as they started to spell out the costs for government subsidised aged care facilities instead of user pays retirement villages.
Retirement Villages have contracts that need to be read carefully. It is a user pays model. It is not government subsidised. In most circumstances you will pay an upfront price – just like buying a home. However you will most likely incur a deferred exit fee based on a percentage per annum. You will also pay ongoing costs for maintenance etc. Retirement villages will claim they charge the deferred exit fee to recoup their upfront costs i.e. they let you buy a home/unit at a cheap price (less than the market value) so you have a better chance of being able to move in with limited finances. They then recoup the market value from your exit cost. For example, you pay say $250,000 for a unit. 5 years later you move to an aged care facility and receive just $180,000. That is the deferred exit cost you need to be aware of…before you move in.
There can also be issues with selling the unit. Make sure you understand that process and how that may impact you financially, especially if you need that money to pay for aged care accommodation or another unit somewhere else.
Aged Care facilities or nursing homes on the other hand, are predominately government subsidised and regulated…..
In most cases a contribution towards the costs of aged care is required. Contributions vary and depend upon income, assets and pensioner status. Fees may include a combination of means-tested accommodation and care fees, a basic daily care fee and fees for extra optional services. Fees are revised twice yearly in line with pension revisions. Care recipients have the option of paying their accommodation fee as an upfront refundable deposit or a rent-style periodic payment.
As for the type of fees, depending on the facility, one or more of the following may apply:
Unlike retirement villages, the structure above is government regulated. Your deposit (RAD) is guaranteed to be returned in full, unless you agree with facility to deduct some ongoing costs.
What you pay towards full-time aged care is dependent on your assets and income as assessed by Centrelink. People with higher levels of assets will pay more. Some people with very low levels of assets will pay nothing – however everyone pays the Basic Daily Care Fee as a minimum.
It would be wise to seek the advice of a solicitor or financial adviser before signing any contract to enter a retirement village.
Before you enter full-time aged care it’s also advisable to refer to an accredited financial adviser. This is so you can determine what government support you are entitled to, work out what facility you can afford, and how to fund the ongoing costs. If you overstate or understate your financial position this will affect the fees you pay.