The retirement village industry 8-point improvement plan and why it fails retirees
- Support nationally consistent retirement village legislation and contracts.
- Retvill.net comment - A singular legislative framework under the auspices of the federal government together with a singular model contract is the only outcome that will truly protect consumers. State governments despite the best intentions of some have succumbed to the slick presentations of the industry and shown a lack of desire to protect retirees from the financial ravages of a deferred management fee business model.
- Ensure there are transparent and easy-to-understand descriptions in contracts of entry pricing, ongoing service fees, reinstatement costs and fees and payments relating to departure, so residents have certainty about the costs associated with living in a retirement village.
Retvill.net comment - Transparency and easy-to-understand descriptions although important are not the primary issue here, the primary issue is the very existence of an entry cost (lease/licence) rather than an outright purchase cost or rental. Service fees, maintenance costs on a property not owned by the village resident, reinstatement costs on a property not owned by the village resident, a 'deferred management' fee effectively paid on entry not on exit, the decimation by inflation over time of the refundable portion of the entry cost. All this permitted by government legislation through a deferred management fee model of residential occupancy for older Australians.
- Encourage all potential residents to seek independent legal advice before signing a contract, and work together with government and the legal profession to make this happen. We will also encourage potential residents to share this information with family members and trusted advisers.
- Retvill.net comment - Many, many prospective retirement village residents do seek professional advice. Many lawyers, accountants, financial advisers simply do not have a sound knowledge of the longer term impacts of the deferred management fee business model. Encourage is a word chosen by the industry because the fear is the use of the word legislated. It is unlikely any lawyer, accountant, financial adviser anywhere in Australia who understands this industry and the deferred fee model would recommend to a client to proceed without a deep understanding and expectation of the financial consequences.
- Improve training and professional support for village managers, sales people and other staff who engage directly with current and potential residents.
- Retvill.net comment - This area is essential if consumers are to be truly protected, however mandates are required from legislators and regulators as self regulation, codes of conduct, in-house industry standards have a poor record. It It is a relatively simple proposition, is the objective of governments and regulators to protect retirees from the worst aspect of the industry and indeed for some from themselves.. If the answer is yes then the actions should be to truly protect them at all levels.
- Commit to improve industry village accreditation standards and coverage, and support government initiatives to make accreditation a mandatory requirement for operating a village.
- Retvill.net comment - Accreditation is an essential element required in the retirement village industry, the very nature of the deferred management fee business model demands it. The markets for outright purchase of residential accommodation or the rental of residential accommodation are competitive and well understood by all parties. The very weakness of the retirement village industry is the fact that deferred management fee model is so little understood by legislators, regulators, professional advisers and particularly retirees.
- Commit to working with the Australian Retirement Village Residents Association to implement an industry Code of Conduct to set and maintain high standards about the marketing and operation of villages, as well as dispute management procedures for all operators and residents.
- Retvill.net comment - Sorry but a Code of Conduct simply does not work. You only have to look at the Consumer Affairs Victoria retirement village industry code of conduct and the submissions by retirees to the Victorian Government enquiry into the retirement living industry to see the failure of it. Mandated requirements are a necessity together with a framework for compliance enforcement readily available to village residents.
- Commit to the establishment of an efficient and cost-effective government-backed independent dispute resolution process, such as an Ombudsman or Advocate, for disputes that are unable to be solved at a village level.
- Retvill.net comment - Together with the removal of the legislated blueprint for the deferred management fee business model this is an essential retirement village industry reform. If the cop on the beat can't or won't enforce the law then a new cop is required. A new cop with the capacity to make decisions in a timely manner and sweeping powers to enforce those decisions. Anything less will be a failure of governments to act in the best interests of their citizens.
- Maintain and strengthen the relationship between industry and the Australian Retirement Village Residents Association to make sure resident issues are clearly identified and addressed.
- Retvill.net comment - Ideal in a perfect world but sadly we do not live in a perfect world however any stronger relationship between owners/operators and retirement village residents is welcome. The relationship should be between the industry and the representative body from each state. There should be a mandated annual report from each state body representing retirement village residents to the respective state or a national retirement village ombudsman/advocate as a means of helping to ensure matters raised from grass roots level are confirmed as receiving attention at the industry level.
Nothing in the eight point plan as outlined by the industry will save retirement village residents from the substantial negative financial impacts of the deferred management fee business model.
Until there is a 9 point plan with point 9 outlining reforms to the deferred management fee model, retirees will still suffer the decimation of their capital base as outlined in the example below.
See table below:-
Industry 8 Point Plan Fails Retirees.
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