Aged care policy just as problematic as super
The Federal Government not only needs to address some of its Budget superannuation changes but also Australia's highly problematic aged care regime.
That is the assessment of Brisbane-based adviser and aged care advice specialist, Robert Ross, who has pointed to the growing complexity of the aged care regime and the challenges it is creating for both advisers and their ageing clients.
He said that since Government changes implemented in July 2014, altering what individual consumers needed to pay for their own aged care, the amounts being demanded were horreondous.
"People are paying up to $550,000 (called a ‘Refundable Accommodation Deposit' (RAD)) for a room smaller than their kitchen at home," Ross said.
Further, he said that it could take up to a year after the death of the person before the estate received the money back, with the aged care facility paying the estate an interest rate of just three per cent.
"If the consumer cannot pay for the room but can pay for, say, half of it ($275,000) the balance due ($275,000) will be charged interest at the rate of 6.5 per cent or $17,875 per year," Ross said.
"This interest payment is called a ‘Daily Accommodation Payment' (DAP). If they don't pay the DAP it will accumulate as a debt against the $275,000 they did pay. When they die that unpaid DAP balance will be deducted."
Ross questioned how any regulator system allowed for the imposition of an interest rate of 6.5 per cent in the current market environment.
He also pointed out that the amount paid as a RAD was mean-tested against assets and income.
"Before January this year, the consumer in care could rent out the family house to help pay for care but since January the rent counts as income which has the effect of increasing income and increasing the amount of the RAD requirement," Ross said.
Recommended for you
With just 30 per cent of Australians knowing their superannuation balance to the nearest $1,000, Findex has emphasised the role of financial advice in addressing the critical super knowledge gap.
Underestimating the cost of insurance by almost $75,000 in a Statement of Advice is among multiple reasons that a relevant provider has faced action from the FSCP.
Financial Services Council chief executive, Blake Briggs, is urging Minister for Financial Services, Stephen Jones, to take advantage of the QAR opportunity to reduce regulatory duplication and ensure advice is affordable.
Former chair of the House of Representatives’ Standing Economics Committee, Tim Wilson, is planning a return to politics after losing his seat in the 2022 federal election.
