The Transfer of Intergenerational Wealth

"Families need to be aware that what we are talking about here is the transfer of intergenerational wealth, not to families, but into the pockets of large multi-nationals.

Shame about elderly people not having enough money for aged care."

Tom Gait, Retirement Village Residents Association.

Retirement Village

The things you should know before entering a Retirement Village.

"The role of government is to create an environment for commerce to function whilst at the same time protecting retirees and particularly vulnerable retirees from both financial and emotional harm emanating from that function. 
The Victorian Retirement Villages Act 1986 provides the environment for commerce to function but fails to fully protect retirees from financial and emotional harm as a result of it. 
The Victorian legislative definition of a retirement village in demanding the payment of an 'in-going' amount without the transfer of ownership is a major contributor to that financial and emotional harm suffered by retirees." 
Retvill.net

"Families need to be aware that what we are talking about here is the transfer of intergenerational wealth, not to families, but into the pockets of large multi-nationals. Shame about elderly people not having enough money for aged care." 
Tom Gait, Retirement Village Residents Association.


Living in a retirement village is popular and the market is growing, it has the capacity to be a good lifestyle decision but also the capacity to be a very poor financial decision.

There are many variations to the arrangements to enter a Retirement Village, the principles discussed here may not match all of them.

It is easy to identify benefits of living in a retirement village as they are laid out in the glossy promotional material but the costs, the 'real' costs can be a little more difficult. This site has a focus on areas that are generally not discussed in the operator promotional material or the consumer advice material.

Such as:-
  • What is the real cost of the Deferred Management Fee? (the operator keeps this part)
  • What is the real cost of the Refundable Amount? (aka the interest free loan to the operator - this part is due for refund on departure)
  • What is the real cost where the 'deferred management fee' is calculated on the exit price rather than the entry price.
  • What is the real cost where there is no 'capital gain' provision in the contract.
  • What is the real impact on retiree capital of living in a retirement village and the subsequent capacity of retirees to fund their aged care. (enables a comparative analysis)
  • What is the real cost of living in a Retirement village as opposed to a standard Residential Tenancy.

The following chart shows what can happen to retiree capital, whether to retain the family home, enter a retirement village or take a residential tenancy. (applicable to loan/lease or loan/licence villages)




The following chart shows the cost of living in a retirement village expressed on a weekly basis compared to a standard residential tenancy. (applicable to loan/lease or loan/licence villages) 


 The following chart shows the variations in financial outcomes where there is a range of capital gain over the occupancy period. (applicable to loan/lease or loan/licence villages)                    





The graphic above indicates how the 'deferred fee', inflation, rising property prices and rising nursing home entry costs can devalue your refundable $ amount. When the nice salesperson says "Don't worry about the deferred fee, it is paid on exit and something your children will deal with" do not accept that statement without further research. The impact of the deferred fee, loss of earnings, inflation etc. is something many will have to deal with. A change in circumstances without further financial resources could leave a person in a financial position they did not envisage at the outset. It is important to anticipate what the financial position might be in say 5, 10, 15 years. Additional capital resources may be needed to meet the cost of any change in circumstances – eg: choose or need to leave the village, re-enter the property market, meet the cost of a nursing home bond.


A deferred fee may also be described as,
  • Capital Contribution
  • Fee Payable on Exit
  • Departure or Outgoing Fee
  • Deferred Management Fee
  • Reducing Refundable Amount
  • DMF
  • Scheduled Annual Rental
A refundable amount due on exit may also be described as,
  • Refundable Capital Contribution
  • Fixed Refundable Contribution
  • Interest Free Loan to the Operator
  • Refundable Lease Premium
  • Bond Remainder
The entry fee may also be described as,
  • Purchase Price - whether ownership or not
  • In-going Amount
  • Entry Price
  • Lease Premium
  • Capital Bond

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Function of Government

The role of government is to create an environment for commerce to function whilst at the same time protecting retirees and particularly vulnerable retirees from both financial and emotional harm emanating from that function.

The Victorian Retirement Villages Act 1986 provides the environment for commerce to function but fails to fully protect retirees from financial and emotional harm as a result of it.

The Victorian legislative definition of a retirement village in demanding the payment of an 'in-going' amount without the transfer of property ownership is a major contributor to that financial and emotional harm suffered by retirees.


retvill.net

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