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Aged Care in Australia
September 20, 2014
Important Notice
This presentation has been prepared by KeyInvest Ltd ABN 74 087 649 474 AFSL No. 240667.
The information in this presentation is current as at 20 Sep 2014 but may be subject to change. The information is general in nature and has been prepared without taking into account the investment objectives, financial situation or needs of a particular investor.
This information has been compiled from sources considered to be reliable, but is not guaranteed. Any potential investor should consider the latest Product Disclosure Statement (“PDS”) and/or Supplementary PDS in deciding whether to acquire, or to continue to hold, an investment in the Life Events Bond & Funeral Bond.
This information in not to be reproduced or used without first obtaining permission from KeyInvest.
Aged Care
Over 1 million older people receive some form of care
In 2009-10• Around 616,000 people over 70 received HACC services• Around 70,000 received intensive Community Care services• Around 215,000 people received permanent Residential
Care• Around 69,600 veteran’s received VHC and 31,400
received Community Nursing
By 2050• 2.8 million will receive aged care services in the community• 700,000 (20%) in a residential care facility• 9 million people aged 65+
Aged Care
Where will the 2.8 million people live to access:
•Care?•Social Interaction?•Meals?•Personal assistance?
Will you access care here?
Or here?
Or here?
Get an ACAT
Respite $47.15 pd for up to 9 weeks a year
Home Care $9.70 pd + Care contribution
Residential Care Entry costs – Lump sum or daily paymentOngoing costs - $47.15pd + Care Contribution + Extra
services (optional)
Access to Care Packages and Respite can be crucial to stay at home
The costs of Aged Care
Home Care – care contributionIs a formalised process from 1/7/201450c per dollar above $25,118 (single rate)
Full Pensioners and equivalent ~ basic fee (17.5% pension - $9.70pd) (up to $25,118 single) no care contribution
Part Pensioners and equivalent ~ basic fee + care contribution($25,118 to $47,985 single) capped $5,070 p.a
Self Funded retirees and equivalent ~ basic fee + care contribution (over $47,985 single) capped $10,140 p.a
Dorothy is 78, she is a part- pensioner.
She currently receives a CACP and pays $9.70p.d/$3,540.50p.a
AssetsHouse $750,000Cash $190,000Contents $ 5,000
Income stream $5,000p.a
Basic Care Fee $9.70p.dCare Contribution $4.64p.dTotal $5,223p.a
Case Study
If Dorothy kept $30,000 in cash and invested $160,000 via an insurance bond in a trust
Basic Care Fee $9.70p.dCare Contribution $0.99p.d (reduced $1,333p.a)Total $3,854.40p.a
IncomeCash $30,000 - $1,050p.aTrust $160,000 - $0p.aOther income - $5,000p.aPension - $21,491.80p.a (increase $2,665p.a)Total - $27,541.80p.a
Total first year saving $3,997
Case Study
Residential Aged Care
Residential Care
Entry costs (Accommodation payments) subject to Market Price.
Resident can choose payment method:
•Lump Sum (Refundable Accommodation Deposit)
•Daily Charge (Daily Accommodation Payment)
•Combination
RAD is returned in full on leaving the facility
My Aged Care Website and Hotline
www.myagedcare.gov.au Phone - 1800 200 422
How much will you pay?Accommodation Prices
Accommodation Payments have 2 Tiers:Tier 1 for payments up to$550,000 (RAD)
Tier 2 for accommodation payments above the Tier 1 threshold. Prices require government approval.
Published on My Aged Care Website, Facility Website, Brochures together with facility features.
•Can pay less than the published RAD but not more. Be careful!•Cant pay or don’t want to pay the full RAD? Remainder will be paid as DAP
Calculating the daily payment
RAD X MPIR = DAP350,000 x 6.69% = 23,415 / 365 = $64.15pdNote the interest rate changes to 6.63% from 1 October 2014
How much will you contribute to your care?
Everyone pays the Basic Daily Fee $47.15 pd (85% of basic age pension)
Extra services are optional $10 pd to $100+pd
Ongoing Care costs are subsidised by the government. The extra amount someone contributes to their ongoing care costs is based on their assets and income.
Assets below $45,500 and Income below $25,118.60 no contribution
Care Contribution
Formula50c per dollar above $25,118.60 plus17.5% of assets between $45,500 - $155,823.30 plus1% of assets between $155,823.30 - $376,469.60 plus2% of assets above $376,469.60Minus Accommodation Supplement ($53.04)
Capped at $25,349p.a/Cost of Care
Supported Residents
Common Misconception: “If I don’t have any money, I won’t get in!”
Assets below $45,500 and Income below $25,118.60 = Fully Support Resident.
Once assets or income exceed the threshold we use the following formulae to determine the amount the resident can pay.
50c per dollar above $25,118.60 plus17.5% of assets between $45,500 - $155,823.30
Govt will pay the difference between the resident contribution and up to $53.04 as supplement.
Supported ResidentsJack and Mary are full pensioners – Jack is needing residential care
Assets = House $600,000 (exempt asset by Mary)Cash at Bank $180,000Contents $ 15,000
Total $195,000 divided by 2 = $97,500
Income is less than $24,650.20 = $0 (illness separated rate)
Assets$97,500 - $45,500 = $52,000 X 17.5% = $9,125
$9,125 + $0 = $9,125/364
= $25.00 p.d Daily Accommodation Contribution (DAC) Or RAC $136,398
Supported ResidentsBefore Jack moves into residential care:
–Buys two Funeral Bond $24,000–Gifts $10,000 to his children
Assets (half share) = $80,500
Income is less than $24,835.20 = $0
Assets$80,500 - $45,500 = $35,000 X 17.5% = $6,141.83$6,141.83 + $0 = $6,141.83/364
= $16.83 p.d Daily Accommodation Contribution (DAC) Or RAC $91,806 Saving $2,983.17 pa a ROI of 17.5%
Non supported residents
Shirley is 84, full pensioner.She currently receives a CACP and pays $9.70p.d/$3,493.05p.a
AssetsHouse $550,000Cash $48,000Contents $2,000
Do I have to sell my home?
Shirley – keep or sell the house? Accommodation payment $300,000 RAD or $54.99 DAP
But the house is already sold – can I do anything?
RAD Option (sell house) DAP Option (keep house)
RAD $300,000 DAP $54.99p.d
BDCF $47.15p.d BDCF $47.15p.d
Care Contribution $22.14p.d Care Contribution $1.37p.d
Out of Pockets $50p.w Out of Pockets $50p.w
Total $27,890.43p.a Total $40,381.14p.aIncome Income
Pension $747.57pfn Pension $854.30pfn
Interest @ 4% $11,920p.a Interest @ 4% $1,920p.a
Total $31,356.80p.a Total $24,131.80p.a + Rent?
Shirley case studyShirley decided to sell the house and pay a $300,000 RAD. Can her situation be improved?
Total first year savings of $4,166
RAD Option (sell house) $160,000 Bond in Trust
RAD $300,000 RAD $300,000
BDCF $47.15p.d BDCF $47.15p.d
Care Contribution $22.14p.d Care Contribution $18.33p.d
Out of Pockets $50p.w Out of Pockets $50p.w
Total $27,890.43p.a Total $26,499.12p.aIncome Income
Pension $747.57pfn Pension $854.30pfn
Interest @ 4% $11,920p.a Interest @ 4% $5,520p.a
Total $31,356.80p.aSurplus $3,466.37
Total $27,731.80p.aSurplus $1,232.68
Care Contribution is income and asset tested, people can be asked to pay more than their cash flow.
No daily limit, annual limit of $25,349 and lifetime limit of $60,838
Some residents will need to pay for a period of time, stop paying for the remainder of the year, start paying again and stop paying once they hit their lifetime limit.
Self funded retirees
• Keep the former home and rent
• Use of Trusts / Insurance Bonds
• Long Term Annuities
• Funeral Bonds
• Gifting
• Timing of entry
• Cash flow assessment
• Estate Planning
Financial Strategies
• Aged care is more than just a nursing home or hostel
• More living options are developing – the financial and legal arrangements will differ – advice will be important
• Home Care packages are subject to a formal income test
• Residential Care fees generally cost more post 1/7/14
• Supported residents pay a lower entry cost
• Costs are:
• entry (RAD,DAP);
• ongoing BDF $47.15 + Care contribution + Extra Services
• Care contribution. Your assets and income determine how much you pay toward your care
• Its complicated
• Financial advice makes a significant difference
Summary
Age care summary post 1/7/14 rules
Peter age 90 years single
RAD Quoted $300,000 $300,000 $300,000 $300,000RAD paid $300,000 $300,000 $300,000 $300,000
Keep and rent the former home $0 $0 $0 $0Bond in Trust $0 $200,000 $200,000 $200,000
Funeral Bond and/or Gifting $0 $0 $12,000 $22,000Financial Investments $360,000 $160,000 $148,000 $138,000
Deduct DAP from RAD (cashflow strategy) No No No No
First Year savings - Pension $3,333.50 $3,710.00 $3,860.00First Year savings - Care
Contribution $1,838.29 $2,100.76 $2,376.51Total first year savings $5,171.79 $5,810.76 $6,236.51
Strategy options
KeyInvest Calculator
• Up to four strategies side by side for easy comparison• Supports new rules, old rules and home care packages• Will assess supported or un-supported residents• Aged Care fees summary• Cashflow • Centrelink thresholds and actual assets/income displayed• SOA wording• Help desk support
KeyInvest Calculator
KeyInvest support
• Investment Bond help desk
• Aged Car help desk and calculator
• Strategy papers
• SOA wording
• Newsletter articles
• Webinar updates
Thank You
Specialists in Investment and Funeral Bondswww.keyinvest.com.au