A study into the motivations of people who choose retirement village accommodation in New South Wales has found the financial literacy of potential residents to be a concern.
Macquarie University lecturer in applied finance Dr Timothy Kyng hopes to interview 60 new residents of retirement villages and 20 retirement village operators to compile the research which he expects to publish at the end of the year.
Retirement Village Residents Association (RVRA) President Jan Pritchett met with Dr Kyng after responding to his advertisement calling for participants to the study.
One of the key points of information that she passed on was the poor financial literacy of retirement village residents.
Ms Pritchett said part of the reason many people join the RVRA is so they can have some sort of representative body to refer to when they hit financial strife.
They do not think to join RVRA before they hit rock-bottom.
This in itself indicates that retirement village residents are not thinking about their finances before they move into a village, only afterward.
Ms Pritchett said this is primarily due to the fact that retirement village contracts can be extremely convoluted.
“There is often so much detail in retirement village budgets that residents have no idea where their money is going,” she said.
Ms Pritchett said she gets a lot of calls for assistance from family members of residents who have inherited the onus of financial responsibility from a relation who has died or had to be transferred into aged care.
The confusion between loan licenses and owning a retirement village apartment outright is so common that too many sick, elderly people are burdened with the costly business of continuing to pay a retirement village operator on top of the bonds and the ongoing costs of aged care.
Despite the introduction of standardised contracts in NSW obligating full deal disclosure, the structure of contracts can still vary from village to village.
Dr Kyng said he is interested in creating a tool to simplify the process of comparing one financial retirement village contract with another.
“Even mobile phone contracts are complicated and lots of people don’t bother reading the fine print.
"But there’s a lot more at stake with a retirement village contract,” he said.
Dr Kyng said there are many appealing factors of retirement living, namely the social activities they provide, but they come at a cost.
He said many retirees have large, expensive properties and assume that downsizing to retirement living accommodation is a financially-astute decision.
But when the extra-benefits fees of retirement villages starts cutting into their investment money, they can get into trouble.
“There are definitely a lot of advantages of living in retirement villages but from a consumer point-of-view the information is not transparent.”
For more on the law of retirement village contracts in NSW click here.
To be a part of the Macquarie University Retirement Villages Study, please contact:
Dr Timothy Kyng
P: 02 98507289