In retirement villages, choice is supposed to be at the heart of the experience – choice of community, lifestyle and care. Yet, when it comes to how residents pay, many villages still offer only one option.
Increasingly, operators are recognising that isn’t good enough. Many – big and small, for-profit and not-for-profit – now offer residents a choice: pay the management fee upfront or pay it at the end. The question is, should that choice be mandatory?
Aged care can be difficult to afford, so it’s important to give retirees as much choice as possible.Credit: Andrew Quilty
The logic is simple. Any time you buy something today but pay for it tomorrow – or in 10 years’ time – it costs more. Sometimes a lot more. Not giving people the option to pay upfront starts to feel a little like forced finance.
It’s the retirement-living equivalent of being told you can only buy a new car if you take out a finance contract with the manufacturer. You might be happy to, but you shouldn’t have to.
Let’s put some numbers around it. Imagine a retirement village unit priced at $850,000 with a 30 per cent deferred management fee. Under this model, you pay $850,000 when you move in, and when you leave – whether that’s in five years or 15 – the operator deducts 30 per cent of the entry price. That’s $255,000.
Now imagine being offered a choice: instead of paying a 30 per cent deferred management fee at the end, you could pay a 20 per cent management fee upfront. That means paying an additional $170,000 on day one. For some people, that upfront payment is too steep. For others, it represents certainty, value and potentially substantial savings.
Payment flexibility isn’t a nice-to-have; it’s a necessity.
Why? Because how you pay for your retirement village unit doesn’t just influence what you pay the village – it influences what you receive from the government.
Paying the fee upfront can reduce your assessable assets. For people receiving the age pension, that can mean a higher pension payment. For every $100,000 your assets exceed the threshold, your pension reduces by $7800 a year. Paying $170,000 upfront instead of $255,000 later could mean you receive $13,260 a year more pension.
