Governments Push Financial Doom

Governments Push Financial Doom - Federal & State Governments are actively directing many retirees toward financial doom despite being advised of the negative financial impact on retirees of their statutory & regulatory actions in the retirement village sector.

The poor response of the Victorian Government to their own retirement living enquiry has received criticism including an observation that "Sadly the Victorian government has been seduced by the industry notion that better consumer protections are at the cost of retirement village innovation and growth."


The above was part of a summary statement on Page 28 of the LSIC report from the committee in March 2007 despite hundreds upon hundreds of retirement village residents together with consumer advocate organisations, providing evidence to the contrary in their submissions to the enquiry.

In June 2007 the ABC 4 Corners program 'Bleed Them Dry Until They Die' aired showing statements such as above to be a representation of the failure of legislators and regulators to fully understand what was and still is happening to older Australians in the retirement village sector.

Problems with the retirement village industry can be summarised into some key areas:-

1. Low operational standards of some operators.


2. Outdated legislative frameworks.


3. A failure of regulatory bodies to police and enforce breaches of law.


4. A failure to provide easy access to the law and justice for retirement village residents.


5. The continued use of the retirement village 'Deferred Management Fee' business model designed for charity organisations of decades past.

Federal & State Governments through statutory and regulatory frameworks are encouraging retirees to step into the financial mire of retirement villages. Legislators don't understand or won't acknowledge the negative financial implications for retirees of the deferred management fee model used in this industry sector. A business model designed for charity organisations of decades past not the modern, slick, profit driven, private enterprise organisations of today.

The following example shows the potential financial impact on a home owner should the home owner decide to sell the family home and downsize into a retirement village. The example uses common contractural parameters found within the industry although there can be variations.

The example shows a difference in outcomes over just 7 years of nearly $750,000.00.

The positive social outcomes of living in a retirement village are acknowledged but at what financial cost to retirees. The outcomes are financially debilitating for many retirees and yet an outcome as described above is actively encouraged and even promoted by Federal & State Governments.

It is important to note that the financial damage done in the example above is not done by bad contracts, by bad operators, by poor legislation, by slow acting regulators. The financial damage done is from just one primary thing the deferred management fee business model.

Legislators and regulators can tinker with contracts, fact sheets, dislosure statements, access to the law and while all these areas are important nothing will stop the financial damage done to retirees unless the deferred management fee business model itself is outlawed or heavily reformed.

In this new century is there really room for a consumer product that even lawyers and financial advisors cannot fully explain to their clients.Should not the retirement village industry be based simply on you either buy it or you rent it, they are two concepts everybody understands even legislators and regulators.

Governments Push Financial Doom

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