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Australians to Sacrifice Their Inheritance to Keep Parents Happy

on the Tuesday, May 2, 2023

Almost three quarters of Australians are willing to sacrifice their own inheritance so their parents and grandparents can enjoy the retirement they deserve, according to new research. The surprising new findings, published in the 2023 CompliSpace Towards the Tipping Point in Aged Care report, suggest a significant shift in who Australians believe should pay for aged care.

Over the past 20 years, almost $1.4 trillion has been gifted by Australians in inheritances, or about $67 billion a year.

At the same time, Australia spends about $30 billion per annum on aged care, which is only half of what comparable countries do, creating a $30 billion funding shortfall every year.

Two-thirds of funding is provided by taxpayers, rather than individuals, which is placing an increasing burden on the Australian Government Budget, particularly with the Baby Boomer generation about to enter aged care in large numbers for the first time.

CompliSpace CEO David Griffiths said with an ageing population, shrinking taxpayer base, and cost-of-living crisis, scrutiny on older Australians who can afford to pay for their own care will intensify.

“Our research has confirmed, for the first time, that Australians want their parents and grandparents to spend their hard-earned savings on themselves, rather than passing it onto their Generation X children or Millennial grandchildren,” he said.

“Older Australians are being given the green light by their own families to spend their savings on their own care, rather than holding back and compromising their own qualify of life.

“Many Australians die with hundreds of thousands of dollars in savings that could have been spent on a more comfortable retirement while they were alive.

“The inescapable fact is that Australia is experiencing an aged care funding crisis and is reaching a tipping point. There are limits to how much taxpayers can provide to support older Australians who can fund their own care.

“The Federal Government needs to make this possible by enabling greater co-contribution models for those who can afford it, while funding one hundred per cent of care for those who can’t.”

According to the Productivity Commission, the average recipient of an inheritance receives about $125,000, is about 50 years old, close to peak earning capacity and established in a house.

The Federal Government’s 2020 Retirement Income Review Report found that “most people die with the bulk of the wealth they had at retirement intact."

Pressure on the system is likely to grow as Australia’s population ages rapidly.

More than 4.1 million Australians, or almost 16 per cent of the population, are currently over the age of 65.

By 2057, that will rise to 8.8 million, or 22 per cent of the population, and by 2097 it will reach 12.8 million people, or one in four Australians.

The Aged Care Financing Authority (ACFA) has found that a sustainable aged care system can only be achieved with more co-contributions from older Australians who can afford to make them.

The Australian Government currently pays for two-thirds of aged care services in Australia, with co-contributions from older Australians making up the remainder.

In 2020-2021 the federal government spent $23.6 billion on aged care.

Mr Griffiths said it was no longer possible for taxpayers to fund the care of wealthy older Australians who can afford to pay for that care themselves.

“It is time to empower Australians to make decisions about their own retirement. Co-contribution models are a way to both make that possible and to salvage aged care from becoming an unsustainable industry that fails older Australians.”