Government spending on aged care is projected to increase from 0.8 per cent to 1.8 per cent of gross domestic product over the next 40 years, since the number of people of working age capable of supporting each Australian aged 65 and over will drop from five to only 2.7 people within the period.
This was one of the key findings of the 2010 Intergenerational Report, with the subsequent Productivity Commission’s draft report on Caring for Older Australians examining ways in which retirees and the Government can respond to the challenges of an ageing population and the future funding costs of aged care.
In her presentation on Caring for Older Australians at the Money Management Retirement Incomes workshop, Strategy Steps director Assyat David outlined the challenges of an ageing population for financial planners and the opportunities aged care can provide to practitioners.
David said Australia’s rapidly ageing population provided planners with unique client opportunities that to date have remained largely untapped in the aged care sector. These include:
- The high cost and complexity of aged care will be the next major financial decision for clients after retirement;
- The considerable lack of practical information and assistance for affected persons and their families places planners in an enviable position in which to help clients;
- Financial planners are increasingly recognising the benefits of including aged care services into their client value proposition; and
- Affected persons and their family turn to trusted professional service providers, such as lawyers, accountants and financial planners, for help and guidance.
David said the aged care market would only continue to grow, but there were complexities within the sector that planners needed to navigate through with sensitivity.
“Clients need to consider the home as a financial resource,” David said. “The Productivity Commission has recommended that the Government establish a Government-backed Aged Care Equity release scheme which would enable individuals to draw down on the equity in their home to contribute to the costs of their aged care and support,” she said.
“The Productivity Commission also recommended that the Government establish an Australian Pensioners Bond scheme to allow age pensioners to purchase a bond from the Government on the sale of their primary residence.”
David added this bond could reduce investable assets, which could be the only option to get an asset exemption.
While the aged care market will provide planners with significant opportunities, David warned that the industry had to do more in terms of better long-term planning before and during retirement, and with planners needing to include aged care plans in their clients’ strategies.
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