Retirement villages: read the fine print

Growth in New Zealand’s retirement sector has been nothing short of stellar over the past decade, not least in Otago.

However, Troy Churton from the Commission for Financial Capability cautions there are fish-hooks retirees should consider when signing up for retirement villages.

He explains some of them to ODT senior business reporter Simon Hartley.

Otago has 23 retirement villages and another six more are in development, each containing up to 100 units.

While recent research shows Otago had just 15,400 residents aged over 75 last year, of a total more than 300,000 around the country, the province is nevertheless experiencing major growth in the sector.

Tory Churton is the national manager of retirement villages at the Commission for Financial Capability, which is headed by Retirement Commissioner Diane Maxwell.

"Otago's seen as a boom area for retirement villages as there's a high percentage of people aged 65 or more who own their own homes, and could therefore afford to buy a licence to occupy a village unit,'' Mr Churton said.

However, there were some potential pitfalls for people moving into retirement villages.

"Many people do not fully understand the financial implications of retirement village contracts when they pay for a licence to occupy a unit.''

The Commission for Financial Capability is running free seminars in Otago looking at the pros and cons of moving into retirement villages. The first is in Mosgiel on May 4, followed by Cromwell on July 12 and Wanaka on July 16.

Mr Churton said there were several issues to consider, such as the occupation right agreements offered by some retirement village companies which had "little financial sympathy'' when an occupancy ended, due either to the resident dying or having to move into more intensive rest-home care.

"The company may not pay out the unit's capital to the family until the unit is relicensed, which can take months in some areas.

"And they may demand that weekly fees continue to be paid during that time.''

Another issue to be considered was what would happen if a married couple bought into an independent-living unit, but then one or the other had to move into a care facility, and what additional costs might then apply.

Care facilities in retirement villages came under a different funding and regulatory regime, so the facility room cost was charged separately, he said.

A couple could apply for a rest-home subsidy through the health system, but the financial threshold for eligibility was low.

"While the capital that is still tied up in the lease of the independent unit in which one partner may still be living is excluded, the village may charge additional daily fees for the care facility room which are not covered by the rest-home subsidy,'' he said.

This was particularly the case if the room was a "premium'' rather than a general room.

"Some villages offer only premium care rooms, so a couple has no choice but to pay the extra fees if one member needs rest-home care,'' Mr Churton said.

The Commission for Financial Capability is an independent government agency which monitors the retirement village industry, as part of obligations under the Retirement Villages Act (2003).

Devil in the detail
Fish-hooks in the fine print
 • Ending occupation rights agreements
 • Unit relicensing
 • Extent of capital repayments
 • Circumstances of ongoing fee payments
 • Changing type of care facilities


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