Accommodation Costs for direct entrants to Residential Aged Care in standard nursing homes 

 
Standard nursing homes levy a daily Accommodation Charge

Standard nursing homes may ask new entrants to aged care for a daily Accommodation Charge.  You cannot be asked for a lump sum payment, or Accommodation Bond, for a standard nursing home place if you are entering direct from your own home.

The maximum amount that a potential new resident can be asked to pay for accommodation in a residential aged care facility is prescribed by the Commonwealth. 

The amount that you could be asked to pay for accommodation in an aged care facility is based on your ‘assessed assets’ as calculated under the Commonwealth’s rules. 

For a single person who was living alone, ‘assessed assets’ is usually the total value of all of their assets including their home.  The rules for potential aged care residents who are part of a ‘couple at Centrelink’ or who shared a home are complex.  The next section on Assessed Assets provides some clues.  You can read about “Who is a couple at Centrelink” at http://www.financialcareservices.com.au/newsletters/vol-1-ed-3

Need help with estimating your assessed assets just call Christine (03) 9808  0338 at Financial Care Services to arrange an appointment. 

Commonwealth subsidized places for Fully Supported and Partially Supported Residents

People with ‘assessed assets’ of not more than $40,500 (April 2012) are not required to contribute to the costs of their nursing home accommodation.  The Commonwealth pays a small subsidy to the facilities in respect of each of these ‘Fully Supported Residents’. 

New entrants to aged care with ‘assessed assets’ of more than $40,500 but less than $108,267 (April 2012) are required to make a small contribution to the costs of their nursing home accommodation.  The Commonwealth pays a lower subsidy to the facilities in respect of each of these ‘Partially Supported Residents’.  New Partially Supported nursing home residents in April 2012, would pay a daily Accommodation Charge of less than $32.58.

If you think that you qualify as a Fully Supported Resident or a Partially Supported Resident then you must complete the Permanent Residential Aged Care Request for an Assets Assessment (a blue and white A4 booklet containing 20 pages of Questions) and send it to Centrelink.  Help is available just call Christine 03 9808 0338 at Financial Care Services to arrange an appointment. 

Centrelink respond by mailing an Asset Assessment Certificate which you can show to your preferred aged care facility.  Note that an aged care facility must not allocate a Supported Resident bed to a new resident before receiving a copy of an Asset Assessment Certificate that qualifies that new entrant for a Fully or Partially Supported Resident place.

Non Supported Residents pay the maximum rate of Accommodation Charge

A new entrant to aged care who becomes a permanent Non Supported Resident in a Standard High Care place in April 2012 would pay a daily Accommodation Charge of $32.58 provided that their ‘assessed assets’ exceeds $108,266. 

The Commonwealth does not insist that potential Non Supported Resident submit a Permanent Residential Aged Care Request for an Assets Assessment. 

But the nursing home must be given either an Asset Assessment Certificate or a signed statement confirming that the new Non Supported Resident has ‘assessed assets’ of at least $108,267 for a standard High Care place.

The Accommodation Charge is just a part of the cost of living in a nursing home.  Coming soon –Daily fees for residential aged care.

For a personal overview of the nursing home fees applicable to your family member or help with estimating your assessed assets just call Christine 03 9808 0338 at Financial Care Services to arrange an appointment.

Advance funding of your funeral

Advance funding of your funeral

Alas each of us will die eventually.  A healthy lifestyle and advanced medical care might prolong life but the day will come eventually when our mortal bodies are worn out and just stop functioning.

Is a funeral essential?

Australian law requires that ‘human remains’ be treated with dignity.  Thus your mortal body must be despatched appropriately by burial, cremation or acceptance for medical research purposes. 

The choice of funeral arrangements is extensive and limited only by the requirement that all human remains are handled respectfully and disposed of reasonably promptly in an approved manner.  Hence the funeral industry is ready to undertake the task of despatching our bodies with dignity and respect after our souls have departed.

A funeral service or wake is not required by law but most families want to gather with friends to mourn their loss.  Australian funeral practices and traditions are as varied as our cultures and heritages. 

Who is responsible for arranging my funeral?

The executors of your Will are responsible for arranging your funeral and paying for it out of your estate.

If you did not make a Will then your next of kin might have to arrange a funeral and pay for it with their own money and hope to be reimbursed later.

You could avoid stressing your family about the what and where of your funeral by having a pre arranged funeral paid for in full in advance.

What are the costs of a decent funeral?

A very basic but decent disposal of the deceased could cost around $3,000.  For your $3,000 you might get a vertical burial of a shroud wrapped body in degradable box into an unmarked spot in a remote burial ground resembling a country paddock, or perhaps a cremation in a chipboard box with the ashes available for collection weeks later.

In Melbourne, around $7,000 could purchase a modest funeral.  For your $7,000 you might get a minister of your religion, or a secular celebrant, to meet with the family and then conduct an hour long memorial in a chapel, plus a cremation in a wood veneered box with handles, topped with a floral tribute.  Or you could spend your $7,000 on a church service followed by a burial in a proper wooden box into the family grave.  The cost of ‘purchasing’ a new burial plot might be an additional expense.

If you have more funds available and/or a strong preference for public display then you could spend much more.  For example, you could aspire to having a new mausoleum with extensive engravings on the memorial plaque.  Your extended family could be conveyed from the chapel to the cemetery in a fleet of limousines and then back to a lavish wake.

Why arrange my funeral now?

Pre arranged funerals may better reflect your wishes and budget.

By arranging your funeral while you are in good health you are able to consult your family and then calmly make your selections. 

Thus your family are protected from emotional pressure to spend excessively.  They would not be subject to the ploy, “Would that coffin be respectful to your mother? Maybe this one made of real timber and with the brass handles would be more appropriate?”  And thus the family are pressured into spending lavishly on a box that would hardly be seen for the flowers at the chapel and then burnt up later that day.  Additional amounts of $5,000, yes, five thousand dollars, for a more ‘respectful’ coffin are not rare.

Pre arranged funerals save the family from a paperwork stress

Before the funeral actually takes place the funeral director must organise registration of the death with the relevant State or Territory Registrar.  The registration of a death requires some personal information about the deceased person. 

You are asked to provide this information as part of the pre-paid funeral arrangements.  While you are healthy, collating your personal information could be a family history exercise.  Your children and grandchildren could be interested to know about the earlier generations.  Then on the other hand, you might prefer to just give the funeral director the correct personal data and refrain from telling all your family’s secrets to the next generation.

Alas if someone dies without documenting their personal data the next of kin must get thinking fast to recall all the facts.  You cannot just send a son-in-law to arrange the funeral as he would likely come back and say, “You will have to go yourselves as I have no idea of when or where he was born.”

What are the financial benefits of a pre arranged funeral?

Pre arranged funerals are paid for in full at today’s prices.  Therefore your executor would not get a large bill for the basic funeral to be paid for before your estate could be accessed. 

Please note that whilst you may select the style of refreshments to be offered after your funeral service, the cost of refreshments is not normally included in the pre-paid funeral package.  Your family or executors would need to pay for the refreshments and/or wake separately.

Pre arranged funeral plans are ‘exempt assets’ at Centrelink and DVA

Once you have your pre arranged funeral contract that details the agreed services and confirms that you have paid in full for these services then your pre arranged funeral contract is excluded from your assets for Centrelink and DVA, means testing purposes.

This means that you do not need to tell Centrelink about your pre arranged funeral.  But in order to explain that large withdrawal from your bank account, you could show Centrelink or DVA, the receipt for the pre arranged funeral. 

But what if I died far away from home?

If you died far away then your executor or next of kin could contact your funeral director who would arrange for your body to be brought back and for your funeral to take place as pre arranged.  Alas there would be an additional fee for retrieving your body from where ever. 

The additional cost could be modest if you were, say, 100km from home visiting your family.  But the additional cost could be substantial if you had a heart attack and died whilst climbing the Himalayas.

If you are still not convinced of the advantages of a pre arranged funeral then you could consider investing in a funeral bond.

Funeral bonds are managed investments with some special features.

• Interest must be added to the capital amount of your bond, that is, it must not drop in value
• The capital and accumulated interest can only be released on death when it is paid to your estate or directly to your funeral director to cover your funeral expenses
• Your funeral bond money is invested in an independently managed funeral fund.

Funeral bonds are not ‘exempt assets’ at Centrelink.  You must include full details and the current value of your funeral bond in your assets each time you update your records at Centrelink or DVA.  If you have not also paid for a pre arranged funeral and you did not invest more than $11,250 in a single funeral bond which satisfies the Centrelink rules then Centrelink or DVA, would not count your funeral bond as an asset for means testing purposes.

But if you have invested in more than one funeral bond even if jointly with your partner, or your total sum invested exceeds the Centrelink limit then one or more of your funeral bonds might be counted as financial assets for Centrelink means testing.  Centrelink or DVA would assess your situation.

If you need help understanding the Centrelink treatment of funeral funds and pre arranged funerals as exempt assets then call Christine on (03) 9808 0338 to make an appointment to discuss your position.

 If you would like further confidential, independent and professional advice about Centrelink, lifestyle or financial issues please contact Christine Hopper (03) 9808 0338.

Financial Income at Centrelink

Newsletter Volume 2 Edition 2

Sent April 2012

Financial Income at Centrelink  April 2012

Centrelink pension benefits are subject to an Income Test and an Assets Test.  Once a person has met the eligibility conditions for an Age Pension or Disability Support Pension the amount of pension payable is subject to means testing.  The amount of pension reduction is calculated under the Income Test and under the Assets Test.  The Test that generated the higher reduction is the Test that is applied.

Income at Centrelink for a the purposes of the Age Pension Income Test includes
• Superannuation pensions, for example, State Superannuation Scheme pensions
• Rents from investment property
• Wages from work (some concessions apply)
• Director’s fees and dividends from private companies
• Deemed income from ‘financial investments’ but not the actual interest and dividends received.

Financial investments at Centrelink include
• Bank, building society and credit union accounts
• Term deposits, unsecured notes and debentures
• Friendly society bonds but not ‘exempt funeral bonds’
• Church and charitable development funds, but some types of account are exempt
• Any other money you have loaned including loans to family trusts and companies
• Managed investments including insurance bonds and property, equity, cash or mortgage trusts or investment funds
• Shares in listed or unlisted public companies
• Cash, gold and other bullion
• Superannuation fund investments held by people who have attained Age Pension Age ( age 65 years for males and currently 64 years 6 months for females), including approved deposit funds, deferred annuities, self managed superannuation funds and allocated pension accounts
• Certain income streams including most short term annuities but excluding many longer term annuities and Asset Tested income streams
• Gifts of money or other assets during the preceding 5 years in excess of $10,000 in any financial year or $30,000 in the last the 5 years.  Read about Centrelink and Gifting at Newsletter Vol 1 Ed 9

Deemed income from financial investments

Under the Pension Income Test, your income from financial investments is assessed under the ‘deeming’ rules.  Deeming assumes that your financial investments are earning a certain rate of income, no matter what income they are actually earning.

From 20 March 2012, a ‘Single at Centrelink’ person is deemed to earn income at 3% per annum on the first $44,600 of financial assets and 4.5% per annum on any balance above $44,600.

A ‘Couple at Centrelink’ is deemed to earn income at 3% per annum on the first $74,400 of their total financial assets and 4.5% per annum on any balance above $74,400.

For means testing purposes, all of the assets owned by a ‘Couple at Centrelink’ are counted as assets of the couple irrespective of whether the individual assets are owned jointly or in individual names.  For more information about ‘Who is a Couple at Centrelink’ read Newsletter Vol 1 Ed 3

Note that the ‘deeming rates’ of 3% and 4.5% are set by the Commonwealth and can be changed at any time.  In contrast, the changeover amounts of $44,600 for a Single and $74,400 for a Couple at Centrelink are usually subject to an ‘indexation increase’ effective each July.

The major Australian banks offer Pensioner Accounts offering with interest at the deeming rates.  Thus a Single at Centrelink Age Pensioner could earn exactly the amount of interest that Centrelink deem her to be earning by placing all of her financial investments into the one Pensioner Account.

Consider Mary an elderly widow with $60,000 of financial assets.  Mary spends all of her pension each fortnight so that her capital savings amount does not change during the year.

Centrelink deem Mary to be earning 3% pa on $44,600 and 4.5% pa on the last $15,400, that is, an annual interest amount of $2,031.  If Mary placed all of her $60,000 in a Pensioner Account for the full year she would expect to be credited with interest of $2,031.

But Mary does not want to have all of her money in the one account so she considers splitting it between two banks.  If she keeps $30,000 in a Pensioner Account at each of two major banks then each bank will treat her as having only the $30,000 eligible for the deeming rate.  Thus Mary would be credited with interest at the rate of 3% pa on each account generating a total of $1,800 of interest for the full year, that is, two accounts each credited with $900.  Mary realised that using two Pensioner Accounts gave her less interest than Centrelink deemed her to be earning so she would not use that approach.

Mary then sought some financial advice.  Mary wanted to keep $10,000 ready for unexpected bills but she was willing to place the other $50,000 into a 12 month term deposit.  The major banks were offering 12 month term deposit with 5% interest which looked good to Mary.  The interest earned on the Pensioner Account will be $300 for the year, as it is all deemed to be at 3% pa.  The 12 month term deposit earned 5% on $50,000, that is, $2,500 payable in a lump sum at the end of the year.  Thus Mary earned a total interest income of $2,800 for the year compared with a deemed income of $2,031.

In summary, the actual amount of investment income could be different from the deemed amount.  If a pensioner wants to replicate the deemed income then all financial assets might need to be held in the one Pensioner Account at a bank.

About Us

Clients of Financial Care Services receive impartial confidential financial advice from an actuary.  Financial Care Services is an independent professional financial advisory service which holds Australian Financial Services Licence number 299570.

Clients are charged flat fees for advice and assistance; no upfront commissions are accepted in respect of clients’ investments.  Home visits and out of hours appointments are available to assist client families.

For more information call Christine on 9808 0338 or visit www.financialcareservices.com.au

Financial Care Services specialises in advising seniors through life’s transitions.

Remember, referring your clients for impartial professional financial advice enhances your profile and reduces the potential for later complaints.

Christine Hopper
Fellow of Institute of Actuaries of Australia
Director and Authorised Representative
Financial Care Services
Telephone 03 9808 0338
www.financialcareservices.com.au

Centrelink Means Testing for the Age Pension

Centrelink Means Testing for the Age Pension

As seen on the Greypath Seniors Forum http://greypath.com/node/39292

Once you have proved to Centrelink that you are old enough and have lived in Australia long enough for an Age Pension then Centrelink determine how much Age Pension you will actually be paid.  Your Age Pension payment amount is subject to means testing.

There are two components of the means testing: an Asset Test and an Income Test.

Centrelink collect your personal information and use it calculate the amount of pension reduction under the Income Test and under the Assets Test.  The Test that generated the higher reduction is the Test that is applied to you.  Thus, you get the lower amount of Age Pension.

Assets Test

For the Assets Test, all of your assets are counted at market values. 

Your main home is not included in your Assessed Assets if you are treated as a Home Owner.  Caution to be treated as a Home Owner you must live in your main home.  If you have not stayed overnight in your main home for a long time then Centrelink could treat it as an investment property even if it is vacant. 

Non Home Owners are allowed more Assessed Assets before the Asset Test bites. 
Special rules apply for granny flats and low value retirement village homes. 

The Assets Test calculation

Your Age Pension could be reduced by $1.50 per fortnight for each $1,000 that the Assessed Value of your Assets exceeds the Asset Test Allowance for your personal situation. 

A Single Home Owner may have Assets valued at $186,750 before the Asset Test bites.  A Single Non Home Owner may have Assets valued at $321,750 before the Asset Test bites.

A Home Owner Couple may have Assets valued at $265,000 before the Asset Test bites.  A Non Home Owner Couple may have Assets valued at $400,000 before the Asset Test bites.

These Asset Test Allowances were current at 20 April 2012.  The Asset Test Allowances are usually increased slightly each July.

Income Test

For the Income Test, Centrelink ask about superannuation and other pensions, earnings from work and from private companies, rental income and your financial investments.  Centrelink use this information calculate your Assessed Income.

Assessed Income at Centrelink for the purposes of the Age Pension Income Test includes
• Superannuation pensions, for example, State Superannuation Scheme pensions
• Retirement pensions paid from other countries, for example, British Social Security Pensions
• Rents from investment property, after deducting the expenses of owning and managing the property
• Wages from work (some concessions apply)
• Director’s fees and dividends from private companies
• Deemed income from ‘financial investments’ but not the actual interest and dividends received.

Your Assessed Income from financial investments is calculated under the ‘deeming’ rules.  Deeming assumes that your financial investments are earning a certain rate of income, no matter what income they are actually earning.

Financial investments at Centrelink include
• Bank, building society and credit union accounts
• Term deposits, unsecured notes and debentures
• Friendly society bonds but not ‘exempt funeral bonds’
• Church and charitable development funds, but some types of account are exempt
• Any other money you have loaned including loans to family trusts and companies
• Managed investments including insurance bonds and property, equity, cash or mortgage trusts or investment funds
• Shares in listed or unlisted public companies
• Cash, gold and other bullion
• Superannuation fund investments held by people who have attained Age Pension Age (age 65 years for males and currently 64 years 6 months for females), including approved deposit funds, deferred annuities, self managed superannuation funds and allocated pension accounts
• Certain income streams including most short term annuities but excluding many longer term annuities and Asset Tested income streams
• Gifts of money or other assets during the preceding 5 years in excess of $10,000 in any financial year or $30,000 in the last the 5 years.  Read about Centrelink and Gifting at Newsletter Vol 1 Ed 9

Calculation of deemed financial income

From 20 March 2012, a ‘Single at Centrelink’ person is deemed to earn income at 3% per annum on the first $44,600 of financial assets and 4.5% per annum on any balance above $44,600.

For example, Mary’s financial investments have a total value of $100,000 thus her annual rate of deemed income is 3% of $44,600 plus 4.5% of ($100,000 – $44,600) that is,
3% of $44,600 + $4.5% of $55,400 = $1,338 + $2,493 = $3,831 per annum

A ‘Couple at Centrelink’ is deemed to earn income at 3% per annum on the first $74,400 of their total financial assets and 4.5% per annum on any balance above $74,400.

For means testing purposes, all of the assets owned by a ‘Couple at Centrelink’ are counted as assets of the couple irrespective of whether the individual assets are owned jointly or in individual names. 

For more information about ‘Who is a Couple at Centrelink’ read Newsletter Vol 1 Ed 3

Changes to the deeming rates

Note that the ‘deeming rates’ of 3% and 4.5% are set by the Commonwealth and can be changed at any time.  In contrast, the changeover amounts of $44,600 for a Single and $74,400 for a Couple at Centrelink are usually subject to an ‘indexation increase’ effective each July.

Pensioner Deeming Accounts

The major Australian banks offer Pensioner Accounts which are credited with interest at the Centrelink deeming rates. 

Thus a Single at Centrelink Age Pensioner could earn exactly the amount of interest that Centrelink deem her to be earning by placing all of her financial investments into the one Pensioner Account. 

Splitting the investment between two or more Pensioner Accounts means that the first $44,600 of each Pensioner Account would earn the lower deeming rate, currently 3%, and only the excess over $44,600 in that Pensioner Account would earn the higher deeming rate.

Income Test

Once your Assessed Income has been calculated Centrelink can undertake an Income Test assessment.

For a Single person, the Income Test reduces the Age Pension by 50 cents per fortnight for each dollar of Assessed Income over $150 per fortnight.

Couples can have $264 per fortnight of Assessed Income before the Income Test reduces each person’s Age Pension by 25 cents per fortnight for each additional dollar of combined Assessed Income of the couple.

To check your Centrelink Age Pension . 

You can estimate the impact of the Centrelink means testing on your Age Pension or just estimate how much Age Pension you could receive when you retire. 

The first step is to collect all of your asset and income data. 
Your bank statement might show overseas pensions and income from investments.   

The second step is to recall if you have borrowed or lent anymoney to family members. Ask your partner about loans within the family that you might have forgotten about.

Then you could sit down quietly and estimate your Assessed Asset amount and your total financial asset value ready to calculate your Assessed Income.  Using your Assessed Asset amount you could work out the impact of the Assests Test for your situation.

The Income Test calculation is next. Then compare the impacts of the Asset Test and the Income Test.

You can repeat the calculations for different scenarios if you are considering rearranging your assets or reducing your working hours. 

Help is available to estimate the financial impact of a change in your income from work, your other financial arrangements or moving home.  Christine at Financial Care Services can show you how your DVA and/or Centrelink Pension would change as your financial position changes.  You could ask Christine to illustrate how your projected new expenditure pattern as a retiree compares with your projected income from pensions and sensible financial investments.

If you would like further confidential, independent and professional advice about Centrelink, lifestyle or financial issues please contact Christine Hopper (03) 9808 0338.

04/04/12

Excellent article published in the DPS Guide to Aged Care about a new program in New South Wales for people who cannot keep their driver’s license.

http://www.agedcareguide.com.au/news.asp?newsid=7098

Age Pensions and Retirement Living Costs

Age Pensions and Retirement Living Costs

Who is eligible for the Pension?

The Commonwealth provides a basic income to Australian residents who are considered unable to work full time on account of age or disability.  The Age Pension for men aged 65 years and women aged 64 years and 6 months, and its financial equivalent: the Disability Support Pension for younger incapacitated people, allows for a basic frugal lifestyle for home owners. 

An additional means tested amount of Rent Assistance is available to pensioners who live in rental accommodation.  Public housing tenants usually have their rent capped as a percentage of income.  But spending one-quarter of your gross income on rent leaves little for your discretionary expenditure.  Pensioners who must rent a home have even less financial flexibility than home owners. 

How much is the Age Pension?

The full rate of Age Pension for a single person increased to $755.50 per fortnight effective from 20 March 2012.  The maximum fortnightly payment consists of $695.30 of Age Pension plus $60.20 of Pension Supplement.  

The full rate of Age Pension for couples living together is $569.50 per fortnight each.  The maximum fortnightly payment consists of $524.10 of Age Pension plus $45.40 of Pension Supplement.  Therefore if both members of the couple are eligible for the Age Pension then the maximum they could receive as a couple living together is $1,139 per fortnight. 

If one of a couple are living in aged care, then the maximum Age Pension payable to each member of the couple is the full Single Rate currently $755.50 per fortnight.

Why the different rates for singles and couples?

The lower rate per person for couples living together is an acknowledgement that some costs such as food and medicine are per person but others such as home heating are for the household.  If one member of a couple goes into aged care, the one staying home is not going to heat the lounge room and feed the cat only on alternate days because only one of the couple now lives at home.

What standard of living does the Age Pension provide?

ASFA, the Association of Superannuation Funds of Australia, asked real retirees how much they actually spent for an active retirement.  Their results are presented as the ASFA Retirement Standard for a Modest Lifestyle or a Comfortable Lifestyle. You can read the detail of the ASFA Retirement Standard at http://www.superannuation.asn.au/resources/retirement-standard. 

In the last quarter of 2011, the average annual cost of a Modest Lifestyle was $21,930, that is, $841 per fortnight for a single person who owned their own home.  The Modest Lifestyle still only allows for fairly basic items.

A Comfortable Lifestyle cost $1,550 per fortnight for a single homeowner in late 2011.  The Comfortable Lifestyle included top-rate health insurance, regular travel within Australia and occasionally overseas, together with more leisure items and a better motor vehicle.

For couple living together in their own home, the average annual cost of a Modest Lifestyle was $31,675 that is, $1,215 per fortnight in the last quarter of 2011.  A Comfortable Lifestyle required $55,249 per year or $2,120 per fortnight for a couple living in their own home.

In summary, the full Age Pension on its own would finance a frugal lifestyle only.  Without some savings, financial stress and distress could easily arise from major unplanned expenses.  Replacing the refrigerator could cause distress to pensioners without savings put aside for a rainy day.

Could a Full Rate Single Age Pensioner finance a Modest Lifestyle?

The average cost of a Modest Lifestyle in late 2011 was $841 per fortnight for a single person who owned their own home.  On 20 March 2012 the full Age Pension increased to a total fortnightly payment of $755.50 for a Single person. 

Thus for a single homeowner there is a gap of about $90 per fortnight between the full Age Pension and the cost of the Modest Lifestyle. 

Centrelink rules allow for $150 per fortnight of other income before the Income Test impacts. 

Thus a single Age Pensioner with little savings but a superannuation pension of $90 per fortnight could expect to afford the Modest Lifestyle.  Her income would be the full Single Age Pension plus her superannuation pension.

If a single Age Pensioner had $100,000 in a bank account and no other income or substantial assets, then she could receive the full Age Pension.  At current deeming rates, her deemed financial income would be $147.35 per fortnight.  In practice, she might be earning a little more interest than the deeming rates.

Yes, a single Age Pensioner could have the full rate of Age Pension plus sufficient other income to finance a Modest Lifestyle as a homeowner.

But could a couple receiving the full rate Age Pension finance a Modest Lifestyle?

Couples who are both able to live at home receive a maximum total fortnightly payment of $1,139 from Centrelink as homeowners.  For couple living together in their own home, the average annual cost of a Modest Lifestyle was $31,675 that is, $1215 per fortnight in the last quarter of 2011.  Hence a gap of at about $80 per fortnight between the combined Age Pensions and the cost of a Modest Lifestyle. 

This income gap could be covered by a superannuation pension or the interest on a joint pensioner bank account of $70,000. 

The per person gap between the cost of a Modest Lifestyle and the full Age Pensions appears to be narrower for a couple than for a single person.  Some additional items for the Modest Lifestyle over the frugal are shared by the couple, such as car running costs, others such as health insurance are on a per person basis.

A couple at Centrelink are allowed $264 of fortnightly income before the Income Test starts to bite.

Yes, an  Age Pensioner couple could have the full rate of Age Pension plus sufficient other income to finance a Modest Lifestyle as a homeowner couple living together.

Remember that the Modest Lifestyle is better than the Age Pension alone, but still only able to afford fairly basic activities.

If you would like further confidential, independent and professional advice about Centrelink, lifestyle or financial issues please contact Christine Hopper (03) 9808 0338.

Buying into seniors paradise, but at what price?

Buying into seniors paradise, but at what price?

Signing up for your dream home in a retirement lifestyle community village means agreeing to buy a bundle of services in exchange for a package of fees and charges.

You maybe enthralled by the offer of fully maintained recreational facilities: your own gym and swimming pool, a private library and gracious community lounges.  You are attracted by the beautiful manicured gardens to enjoy without the responsibilities of planting, weeding and mowing. 

Signing up for your dream home in a retirement lifestyle community village means agreeing to buy a bundle of services in exchange for a package of fees and charges.  Before you sign, you need to be clear about what is included in the package of services and what items are excluded, that is, which items remain as your person responsibility. 

Also, you need to understand the components of the bundle of fees and charges including the exit fee calculation.  The details are all in the contract for your chosen retirement lifestyle community village.

Now the package of fees and charges generally includes a regular service fee and an exit fee.  For marketing purposes the amount of the ‘service fee’ is pitched at a level intended not to frighten potential residents.  But the service fees in total must be sufficient to ensure that the village facility operator has adequate income to cover the cash outgo relating to the level of services provided.  The exit fee is then set at a level expected to cover the remainder of costs and a little ‘profit’ for the village facility sponsor.

How much is the service fee in real money? 

Service fee scales vary significantly depending on the location, style and level of communal facilities and services.  Near Melbourne, the lower end of the service fee range is about 30% of the Age Pension for an independent living villa in a modest outer suburban retirement village.  The upper end is about 50% of the Age Pension for an independent living apartment in a prestige location. 

Please note carefully that ‘independent living’ residents are usually responsible for their own utility bills and possibly Council rates and water rates in addition to their service fees.  Thus, as residents of an ‘independent living’ villa or apartment, your regular expenditure would comprise the ‘service fee’ plus continuing regular living costs similar to the costs of living in your own home, except for the garden maintenance costs.

You could expect the dollar amount of the service fee to increase each year.  Service fee increases could be similar to a CPI adjustment if the service levels are unchanged. 
You are advised to read the contract carefully to be aware of the service fee conditions for your chosen retirement lifestyle community village facility.

When does the service fee stop?

You must pay the regular service fee as long as you are the registered occupant of the apartment/villa.  Most retirement lifestyle community village operators require the service fee to be paid monthly via a direct debit to your bank account.  If you are going travelling for, say, 6 months then you could just lock your apartment/villa and go, knowing that the facility manager would care for your home and while you are away your service fee would continue to be debited each month.

Usually, you or your estate, remain responsible for paying the service fee until a new occupant takes over your former apartment/villa and becomes liable for the service fee.  Many retirement lifestyle community village operators cease charging the service fee after, say, 6 months from the date that your former apartment/villa was cleared of your possessions, cleaned and refurbished to look ‘as new’ ready for a new occupant. 

You are advised to read the contract carefully to be aware of the service fee conditions for your chosen lifestyle community village.

So what are the other components of the fee package?

On leaving a retirement lifestyle community village, an ‘exit’ fee is levied.  Typical components of the exit fee are
• Deferred service fee and/or deferred management fee of up to 30% of the exit price
• Resale fee, 2.5% of the exit price is not unusual as the ‘cost’ for finding a replacement resident
• Refurbishment fee and/or cost of repainting and recarpeting your apartment/villa and possibly upgrading the wet areas to the standard of a new apartment/villa within that facility.

The ‘exit price’ is defined in the contract for your chosen lifestyle community village facility.  Many facilities define the ‘exit price’ as the entry price or ‘buy in’ price that the next resident pays to occupy your former apartment /villa but with a minimum amount of your ‘buy in’ price.

Can I afford to live in my retirement lifestyle dream home?

Before you sign the contract for your dream home in your chosen retirement lifestyle community village you are advised to read the contract carefully.  The numbers and other conditions in the schedules are important too.

Then check your financial position. 

If the ‘buy in’ price is less than what you expect to realise from the sale of your current home then you might have some ‘additional cash’ to pay the service fees.  Please be aware that any ‘additional cash’ released on changing homes could reduce the amount of means tested Disability Support or Age Pension you receive from Centrelink.  Service Pensions and Income Support Supplements from DVA are also means tested.

Help is available to estimate the financial impact of a move into you dream home.  Christine at Financial Care Services can show you how your DVA and/or Centrelink Pension would change as you sell one home and buy another.  You could ask Christine to illustrate how your projected new expenditure pattern as a retirement lifestyle community village resident, compares with your projected income from pensions and sensible financial investments.

Finally your extended family may want to be assured that your assets are not tied up in retirement lifestyle community village apartment or villa, such that funds are not available should you need expensive nursing home care later on.  Similarly they want to be assured that you are not spending all of your (their) inheritance. 

An illustration of the timing and amount to be paid to you, or your estate, after you leave the retirement lifestyle community village can give you and your family peace of mind, just ask Christine at Financial Care Services to help with this.

If you would like further confidential, independent and professional advice about Centrelink, lifestyle or financial issues please contact Christine Hopper (03) 9808 0338.

Finding a good aged care home

Finding a good aged care home

Now that we have the ACAS Assessment how do we find a good aged care place for our family member?

Before you start contacting aged care facilities, try to clarify the ‘what’ and ‘where’ of your ideal facility.

The ‘what’ depends on the individual’s ACAS Assessment.  An ACAS Assessment of HIGH CARE is a permit to enter a nursing home.

An ACAS Assessment of LOW CARE is a permit to enter an aged care hostel.  But if you think that High Care could be needed within a few years then you could focus on facilities that have both High Care and Low Care sections.  Alas, no facility can guarantee that a High Care bed would be available when your family member’s needs more specialised care than the hostel section could provide. Hostels that offer ‘ageing in place’ endeavour to continue caring for residents when their care needs increase. 

If the ACAS Assessment states SECURE DEMENTIA then you need a facility with a key pad locked unit designed for a group of about ten people with severe memory challenges.  Residents who enter as Secure Dementia Low Care are usually permitted stay in that unit for life.

The ‘where’ depends mainly on where the potential visitors live and work.  If the nursing home is within 15 minutes walk from grandma’s home then she could visit her husband every day.  But if the distance is over an hour of driving time then a weekly visit could be a challenge.

The ‘where’ could be influenced by financial factors.  New aged care facilities in leafy suburbs with relatively high land values, generally ask for substantial Accommodation Bonds for both Extra Service High Care and Low Care.  Not many ‘Standard ‘High Care places are being built on highly valued land. 

The Commonwealth offers an on-line “Home Finder” based on location and care level http://www.agedcareaustralia.gov.au/
. 
There is no comprehensive list of aged care facilities with vacant beds.  Many Standard High Care beds are allocated within hours of becoming vacant.  Extra Service High Care and Low Care beds which require substantial Accommodation Bonds are more readily accessible.

Many facilities choose to pay for a listing and maybe an advertisement, in the DPS Aged Care Guide for the relevant State.  The hardcopy DPS Aged Care Guide is an annual publication distributed free by ACAS and hospital social workers.  Alternatively, a copy of the latest DPS Guide for your State is included in the Aged Care Entry pack mailed out by the Commonwealth Aged Care Information Line – Call 1800 200 422.

The on-line version of the DPS Aged Care Guide http://www.agedcareguide.com.au/ includes a listing of ‘Current Vacancies’.

Hospital social workers provide lists of facilities in their area which could have vacancies.  But you still need to check that the ‘listed’ aged care facility is appropriate for your family member.  You should always visit each facility, meet the staff and see the rooms on offer before accepting an aged care place. 

Placement agencies assist families to locate vacant beds in facilities which might be suitable.  Some placement agencies are independent businesses which charge fees to cover the full costs of their services.  Many placement agencies have links to other businesses, such as aged care facilities and financial advisers, which contribute to the running costs of the placement agency.

Before being offered a place in an aged care facility the facility manager will ask you about the potential resident’s financial position.  Please read the next section Accommodation Costs for Residential Aged Care before disclosing any financial information.  You cannot later “undisclose” financial information.

If you would like further confidential, independent and professional advice about Centrelink, lifestyle or financial issues please contact Christine Hopper (03) 9808 0338.

When should seniors move from the family home?

When should seniors move from the family home?

Wisdom is recognising that the family home might soon be inappropriate for your needs and having the courage to sell up and buy into ‘seniors friendly’ accommodation.  But what is inappropriate housing for a senior?

When should seniors move from the family home?

Inappropriate housing is where:
• the garden is a burden to be managed not a sunny paradise to be enjoyed;
• the front steps provide character to the building and character-building opportunities during recovery from bruised faces and fractured limbs;
• watching the guests navigate the web of extension leads across the lounge room floor is more enthralling than anything on the latest electronic entertainment systems;
• the electricity bills are huge and so are the spaces to be heated (or cooled) all day now that you do not rush off to work in the morning; 
• thorough cleaning of the kitchen leaves you thoroughly exhausted: those ‘hard to reach’ spots have become impossible for you to reach;
• the toilet is in a small dark slot off the laundry far from the nice front bedroom, don’t forget that last step down just beyond the kitchen door;
• the only shower is over the claw footed bath accessible only to the agile and sure footed.

If your current home could become inappropriate for you within the next five years then now is the time to plan your move. Remember, you will need stamina and good health to actually establish yourself in your new home and get to know your new neighbours.

But to where?  What are the options for seniors housing?

If you still want to tend your own small garden and/or keep an active animal companion then consider a small single level townhouse or retirement village unit.  Beware of staircases and split level dwellings: they are the precursors of limbs encased in splints, split knees and spilt coffee.  The bathroom needs to be spacious enough to accommodate a frame over the toilet, a chair under the shower, a carer to help with showering and turning space for the walking frame.

If you want to be able to just ‘lock and leave’ to go travelling and/or you really do not want any outdoor responsibilities then consider a suburban lifestyle community residence or a retirement village unit in a garden setting.

Finally, if you are beyond housekeeping then an assisted living apartment could provide you with a private space together with access to communal dining and recreation facilities.

Wherever you choose to call home, you could apply to have government sponsored ‘help to stay at home’.  This help could be house cleaning, meals on wheels, ‘personal assistance’ to get you showered and dressed or someone visiting each day to dispense your regular medication.  Local government receives some funding to provide essential ‘in home’ safety rails and ramps. 

Be warned: the demand for these ‘help to stay home’ services could exceed the number of care and service packages the government offers in your area.  Hence you might need to wait many months for your turn to start accessing a government sponsored service and/or make your own arrangements with commercial providers.

Finally, if you are no longer able to live safely at home because of frailty and/or dementia then residential aged care could provide a secure and caring home away from home.

More information: Where to live in your senior years.  http://www.financialcareservices.com.au/newsletters/vol-1-ed-4

Coming soon – the costs of retirement living in lifestyle communities.

If you would like further confidential, independent and professional advice about Centrelink, lifestyle or financial issues please contact Christine Hopper (03) 9808 0338.

Media List

Here is a list of some of the media items that have received contributions from Christine Hopper.

19/03/12 When should seniors move from the family home? for Greypath
http://greypath.com/node/38906

02/03/2012 Self funded retirees still want Pensioner Concession Cards for Greypath
http://greypath.com/node/38786