Currently, the aged services industry sources the funding for the delivery of aged care services on a retiree pay-as-you-go basis.
The need for services is often urgent and at a time of mental and financial stress for the retiree and their family.
The government does not support all the services retirees may need, and the access to government funding often requires a waiting period.
Aged care providers can augment the government’s ‘safety net’ by providing immediate access and additional services to improve older people’s quality of life.
An opportunity exists for aged care providers to offer innovative financial solutions to capture some of the existing retiree wealth and provide funding ahead of the aged care services being required.
The gap
Currently, there are no financial products designed to support retirees in their retirement beyond providing access to superannuation lump sums or income streams.
This gap in product offerings is significant, especially as retirees move later into their retirement with increased need for services to address physical disabilities that impact their daily lives, manage the consequences of cognitive decline, and mitigate the risks of elder abuse.
Retirees, and society more broadly, can benefit in many ways from pre planning and pre-funding their future needs while they remain relatively healthy, capable and able to plan without being under immediate stress from some adverse event.
Aged care providers have expertise in the delivery of the required services and, together with the retiree prefunding these services, would provide security to both retirees and service providers, helping to make the overall age care ecosystem more robust and efficient.
The gap is big
Australian Bureau of Statistics data indicate that over a third of people aged 65 to 70 have a disability that impacts their daily lives and yet virtually none receive any support from government packages.
Government financial support increases as retirees age, with around a quarter receiving some support in the 70 to 85 age group, but well over half of this group have some disability that impacts their daily life.
It’s only above age 85, where around 80 per cent receive some form of government financial assistance, that the level of support broadly matches the level of impairment. However, the difficulty of obtaining timely and appropriate level of assistance remains an impediment.
Around one million retirees today may need assistance, but do not receive it from the government, and this group is rapidly increasing.
Our research also indicates that over half the population over 80 has some level of cognitive impairment. This can impact their ability to make good f inancial decisions and increases the risk of elder abuse.
Funding to support aged care
Over $800 billion is currently held by retirees in superannuation which is projected to increase more than four fold over the next 15 years.
We estimate at least $200 billion of superannuation funds are held by retirees with disabilities who do not receive government assistance and expect this to increase to almost $1 trillion by 2040.
If 10 per cent of these funds was set aside for immediate or future aged care needs, around $20 to $80 billion would be available.
Additionally, more than 80 per cent of older people own their homes and can top up their super up to age 75 through downsizing their family home, potentially increasing retiree financial resources.
For context, the whole residential care market in Australia was estimated at around $30 billion in 2023.
Sustainable solutions
Sustainable solutions need to address all stakeholder needs:
■ adding value to retirees
■ being commercially viable for aged care providers
■ supporting other ecosystem participants (planners, service providers)
■ being simple and secure to implement (low cost and simple to manage), and
■ being supported by regulators and government.
Aged care package managers are well positioned to flexibly and securely link retiree funds with access to aged care benefits.
We have designed funding solutions and would welcome pursuing them with interested age care providers.
Cary Helenius and Jules Gribble
Directors, Lifetime Income