The Final Report of the Aged Care Taskforce has recommended planning for aged care costs should begin at retirement to improve understanding of the available financial products.
The report, released on 12 March, recommended the government “raise awareness of existing financial products that enable older people to utilise their wealth in retirement and provide confidence they can afford future aged care costs”.
A second recommendation encouraged the behavioural economic team of the Australian government “to provide advice to government on how to encourage people to consider their future aged care needs at an appropriate stage of life”.
The report noted people find it difficult to understand how aged care will affect their finances and a simpler system is needed with better and more accessible information.
This includes considering aged care costs at an earlier stage of life to increase confidence in retirement planning, as many people find it an uncomfortable topic which disincentives them from engaging with the system and potentially leads to suboptimal financial outcomes.
Better access would also speed up entry to the system and encourage individuals to access support at an early, rather than an emergency, stage.
“The Taskforce notes that encouraging older people to access their wealth, including superannuation and home equity release when appropriate, will enable them to make contributions for services to enjoy a dignified experience in aged care.
“At the same time, where people have overestimated their likely future aged care costs, improved information will give them confidence to use their assets and enjoy their retirement. Increasing awareness of options will encourage older people to access their wealth when needed.”
Financial advisers already have a duty under the code of ethics to consider the potential future aged care needs of their clients, which can include acting as their representative when interacting in aged care matters with providers.
However, the report stopped short of making specific recommendations around financial advice as it noted the Quality of Advice Review has discussed superannuation funds, insurers and banks being able to deliver simple advice at scale.
Funding for care
The report also noted older people are wealthier than their predecessors, largely thanks to residential property values, and are more likely to still have a superannuation balance at age 85. On the flip side, the proportion of over-65s accessing the age pension is expected to decline by 15 percentage points by 2062–63.
Currently, government funding constitutes around three-quarters of total costs of residential aged care funding and 95 per cent of home care funding, but the report hinted more should be funded by individuals based on their means.
“Given the increasing wealth of many older people and the declining working age (that is tax paying) population, there is a strong case to increase participant co‑contributions for those with the means to contribute, noting that there will always be a group of participants who need more government support.
“It is appropriate older people make a fair co-contribution to the cost of their aged care based on their means.”
This could include accessing their superannuation early or home equity release, which will enable them to make contributions for services that will allow them to enjoy a dignified experience in aged care.
It also noted, however, that those of lower income, such as pensioners without assets, should still be able to access aged care services. Financial support for them should be retained and consultation showed high support for a “strong safety net” from the government to cover aged care costs.
The Aged Care Taskforce is chaired by Minister for Aged Care, Anika Wells, to review funding arrangements for aged care, develop options for a fair and equitable system, and build on the recommendations made by the Royal Commission into Aged Care Quality and Safety.
