Better Payment Options for Residents going into a Retirement Village

A competitive market place and the different financial needs of retirees has lead two leading retirement village operators to expand their payment options. Those residents going into a retirement village with either Lendlease or IRT will now be able to structure the financial aspects of the transaction to better suit their needs.

Lendlease has four new payment options, although the Pay as you go option is only available in selected villages and for serviced apartments.

IRT also has four payment options, including a non-refundable donation option.

Pay more upfront and less when you leave

One of the benefits of this type of payment is that even though you are paying more upfront, you are ultimately paying less. The upfront fee may be 18% of the ingoing contribution, whereas, if instead of an ‘upfront fee’ paid on moving into the village and the resident was going to pay a ‘deferred management fee’ (DMF) on leaving the village, the DMF may be 35% of the ingoing contribution.

Another, perhaps more important benefit is possible preservation of the pension.

For Example,

Samantha wants to downsize and move into a retirement village where you can take advantage of some of the services. She sells her home for $900,000.00 and uses $450,000.00 of that amount to pay the ingoing contribution on a retirement village. That leaves her with $450,000.00 on the bank.

The retirement village unit, as her principle place of residence is exempt for pension purposes. The funds in the bank, however, exceed the asset threshold for a single person and will result in a deduction of Samantha’s pension.

Where the ingoing resident has the funds to do so, the option to pay more upfront can allow the resident to pay less fees in the long run and to protect their pension.

Pay less upfront and more when you leave

This option is great for those people who want to live in a particular area but can’t afford the average house price in that area, or who have limited funds with which to get into a village.

Paying less upfront allows the resident to live in the area or village that they normally would not be able to afford.

It might also be that you want to keep some of your funds to spend on things you enjoy such travelling or hobbies.

The downside is that they will have to pay a DMF when they leave and this will leave them with even less funds to pay for their next home or aged care accommodation.

Other Variables

There are other variables of the options including:

  • Whether or not you receive any of the capital gains or are liable for any of the capital loss;
  • Whether you will be required to pay reinstatement costs or the operators legal costs on termination;
  • Whether you will be paying recurrent charges until the new resident moves in; and
  • When you will receive your refund (i.e. within 6 months or when a new resident moves in).

These payment options and variables allow ingoing residents not only to compare different villages to find the one they want to live in, but also to choose the payment option that suits them best.

We can help you decide between your finance options and advise you on your retirement village contracts, all for a low fixed fee.

We can also provide advice on how downsizing and property transactions may affect your pension and care fees.

Contact our office on (02) 4369 6975 to speak with one of our specialists today.