Marguerite Taylor No Comments

Reverse Mortgage to Supplement Low Super for Women?

Recent data from Roy Morgan Research reveals that the gender gap between male and female retirement savings is gradually closing. In 2008, the retirement savings of women amounted to 57.7% of the male average, while in 2016 the figure increased to 63%. While this is a remarkable progress, the average superannuation of women may not be enough to sustain a decent lifestyle during retirement.

According to the Workplace Gender Equality Agency (WGEA), there are range of factors contributing to the gender gap in superannuation including:

  • Tax arrangements that benefit higher-paid men
  • Gender pay gap
  • The fact that women take more time off from work to take care of children
  • The fact that women are more likely to work part time

WGEA further reports that the superannuation contribution gap is further compounded by women working part-time (3 out of 4 part-time employees are women) and takes extended periods out of the workforce caring for children and other family members. Hence, more women end up with lower retirement savings.

Australian Women Live Longer then Struggle with their Finances

According to a report released by the Council of Australian Government (COAG) Reform Council, women are generally healthier than men but experience difficulty with their finances, because they less likely to participate in paid work and as we have mentioned above have less superannuation when they retire.

The report also notes that older women (60 years old above) tend to need help with daily activities like household chores and transport. However, almost 30% of senior women report unmet need for help.

By 2050, the number of people aged 65 in Australia will nearly double and those aged over 84 will increase four times. Majority of this population will be women. Senior women don’t necessarily experience difficulty compared to older men, or the other way around, but they have different circumstances. And these unique challenges need innovative solutions like reverse mortgage.

Reverse Mortgage Can Help Women In Retirement

We at RMFS find it unacceptable that Australian senior women have to live with meagre superannuation. That’s why we help our customers, particularly women, to evaluate their finances and find suitable products and services to help them with retirement.

Many senior women have worked hard for years and have already paid off their mortgage. As a matter of fact, working women usually prioritise paying off mortgage first before saving for their retirement. Hence, much of their equity are locked within their homes.

Our reverse mortgage lenders can unlock this equity, so you can use a portion of your wealth to finance your needs during retirement. You can use the loan proceeds in anyway you want such as additional income, debt consolidation, financing aged care, upgrading of home, even purchasing car or paying for holiday.

The best thing about reverse mortgage is that you don’t have to move out from your home, so you can enjoy your residence during your retirement.

To know more about how you can use a reverse mortgage loan, you can call Reverse Mortgage Finance Solutions at 1800 001 020. You can schedule an appointment with our loan experts who will go the extra mile by visiting you at your home.

Regards, Marguerite

Paul Dwyer No Comments

Aged Care – The Government must be the Protector

The residential aged care industry is shared by three sectors – Government regulating the supply and funding for aged care services, aged care facilities providing care and accommodation, and frail and older Australia looking for the care and respect they deserve.

It’s obviously not shared by the article “The dead hand of Government in aged care reform” in September 12th Australian Financial Review by Julie McStay, who is a Director at Hynes Legal and leader of their national aged care and retirement living team.

If aged care providers were not intent in finding holes in the Living Longer Living Better (LLLB) legislation, reforming accommodation payment regulations, or the intent of the reforms and the legislation, owners would not have found themselves in dispute with Government.

If we go back to the reforms initiated by the previous Labor Government, we saw that a contribution paid by residents (retentions drawn from the Bond) would no longer be available to providers, and instead the Bond became fully refundable(known as the Refundable Accommodation Deposit or RAD). Providers were also given the discretion to set RADs up to $550,000, with higher amounts needing to be approved by the Pricing Commissioner. The industry quickly adapted by increasing the cost of the accommodation, with many RADs moving from around $350,000 to the maximum allowed without requiring Government approval.

Retentions previously gave providers around $4,000 per annum in additional funding, whereas the increase in room pricing of $200,000 amounted to about $12,000 per annum when used to offset debt.

Government was advised 12 months ago about the first of additional fees being charged to residents under the guise of Refurbishment/asset replacement by Japara Aged Care. Unfortunately it failed to realise the potential explosion by other providers, with decisions taken by Regis and Estia earlier this year to follow Japara.

What needs to be made clear is that these providers activated or decided to activate these charges prior to the Budget announcement of a reduction of $1.2b in care funding under the Aged Care Funding Instrument. These increases to residents were not as a result of the Government’s Budget announcement.

Eventually another five for-profit providers took up the same charge upon residents, which led to the Government’s clarification.

The provision of funding to meet the cost of care comes from two sources – Government and the consumer. Perhaps the aged care providers and their member associations should understand that Government is not an unlimited source of funding, and should be arguing for an increase in user contribution by adjusting the calculations and annual/lifetime caps accordingly.

The other fee clarification announcement related to services provided additional to those specified in the Aged Care Act. The intent of LLLB in regard to additional services was to highlight the longstanding provision of the Aged Care Act that providers have the option to charge fees for additional services on the condition that residents agree and have the option to opt in/opt out of receiving the additional services such as newspapers, wine, Foxtel etc.

Prior to July 2014, about 15,000 bed licences allocated to providers were used to charge for “extra services”, and the Government was paid 25% of the charged fee. In order to circumnavigate this, providers handed back their licences and substituted “extra services” with “additional services”, with many new residents unable to opt in/opt out, and paid for services they never received or were capable of using.

Consumer protection is vital. The decision to enter to aged care is often taken within days of a sudden event and the ingoing residents and their families have difficulty in not only understanding rules and regulations of aged care, but also the fundamentals of funding the future needs. Sales staff (admission co-ordinators) are trained to maximise the potential return of each inquiry.

Less than 10% of residents would have a total understanding of the future cost of their care and accommodation, and their families are trying to understand all of the interfacing considerations and decision making within days of potential entry. It is Government’ role to provide the protections for its elderly.

The IPO listing of three companies has been led by hedge funds and private equity investors. All are looking for a return on capital greater than other participants, with those returns being sought over a short timeframe and not as a long term investment.

Investment strategy seeking growth and profitability can often run into liquidity problems, with some companies unable to meet payments when required. Government has grave concerns over the potential of any provider not been able to repay Refundable Accommodation Deposits, as it provides a Guarantee for the return to the resident’s estate if such an event occurred.

No other industry receives interest free lump sum payments from clients to assist with the cost of running the business. The Roadmap clearly indicates there will be consideration towards the removal of the Government Guarantee on the repayment of the lump sum to the resident or their estate. It is becoming clearer that Daily Accommodation Payments may be the only option.

The cost of accommodation and care must be jointly shared by Government and residents, with user contributions increasing overtime. But it is the Government who must provide the parameters, for the protection of the frail and elderly whose decision to enter care is often taken under duress of leaving home or hospital and knowing they will never return.

Paul Dwyer is a Credit Adviser in aged care lending.

Marguerite Taylor No Comments

300,000 Pensioners need alternative income for retirement

As reported recently, from January 2017, around 300,000 Australian pensioners will need an alternative source of retirement income as they will be affected by the new ruling in age pension asset test. In less than six months, many will receive a lower pension and some will lose their pension completely. What’s even more concerning? Most of people are unaware of this radical looming change.

Australians, who are aged 65 and above, are entitled to receive part or full pension. Their age pension entitlements are based on their income and asset test. The new rules on age pension asset test were recently legislated and would take effect in January 2017.

People who are nearing retirement or are currently receiving pension entitlements should check their assets ahead of time before the changes take effect. Almost 100,000 of Australian pensioners will lose their entitlements if they don’t act now.

The new asset test ruling allows full pensioner homeowners to own assets up to $250,000 if they are single and up to $375,000 for couples. On the other hand, if you a full pensioner and don’t own a home, you can own assets up to $450,000 if you are single and up to $575,000 for couples if you don’t want your entitlements to be affected.

For part pensioner homeowners, they can own assets up to $547,000 if they are single and up to $823,000 for couples. Part pensioners who don’t own a house can own assets up to $747,000 if they are single and up to $1 million for couples to still be eligible for age pension.

Because of the new asset test ruling, 50,000 of Australians are expected to be better off and receive a full pension. However, around 91,000 of part pensioners will lose their entitlements completely and more than 235,000 will have their entitlements reduced because of the new age pension asset test.

Those who will lose their entitlements can either apply for a Commonwealth senior’s health card or a low-income health card. But we all know that these cards won’t be enough. These cards can only help with medical and pharmaceutical expenses.

If you think you’re one of those who will be affected, consult your financial adviser and plan strategies ahead of time. If you’ve been longing to make renovations, upgrade your vehicle, or take a vacation, it’s feasible you may have more incentive to do that now. Your family home is exempt from the Centrelink means testing so effectively, any money put into it will not be assessed.

However, if you’re going to lose your pension completely, there are other ways to supplement lost income. One is accessing the equity in your home through a Reverse Mortgage. The funds can be accessed as a lump sum, a regular income stream, a line of credit, or a combination of these options. A Reverse Mortgage can effectively fund your needs so you can live a comfortable lifestyle in your retirement years, with or without pension.

Regards, Marguerite