OPINION | Life these days is pretty complicated. Unfortunately, when we’re ready to slow down, things don’t always get easier; in fact they often get more difficult. This is particularly the case when navigating the transition into aged care.
To update Oscar Wilde, the superannuation requirements are uneatable, the aged-care regulations indigestible, leaving members in a situation where the answers are incomprehensible.
Let’s think about this in more detail. The superannuation system is designed to provide for the retirement season of members’ lives, a season likely to include at least some period within the aged-care sector.
In 2016, the Productivity Commission indicated there were 1.3 million aged-care users and this is expected to increase to 3.5 million by 2050. To be more direct, more than one-third of all deaths annually are people living in residential aged-care facilities, so it’s reasonable for super funds to assume that a good proportion of members will spend some time there, even if it’s not directly after retirement.
Big and complicated
While the superannuation system is complex, with seemingly never-ending tinkering by governments and regulators, the aged-care sector takes this to another level. The Aged Care Funding Instrument – which providers must comply with to receive government funding – has more than 100 pages of guidelines, regulations and business rules covering a range of financial, medical and legal issues.
An individual does not have to understand all of these in order to enter a facility, of course, but it does indicate the difficulties inherent in negotiating with the sector, even for those well versed in dealing with technicalities.
As a result, over the last two to three years there has been a notable rise in the number of intermediary agents popping up, such as aged-care placement services. Those trying to navigate the sector and the superannuation system are increasingly turning to such service providers, adding costs to the value chain for aged-care patrons.
Huge initial cost for aged care
Within all the complexities, a major issue that directly affects those entering aged-care facilities is the upfront fee. The average accommodation price agreed upon for a new resident in the last financial year was a refundable deposit of about $370,000, with about 80 per cent requiring some form of lump sum.
For some, this will be funded through the sale of their home, or the return of a bond from a retirement village; for others, it will require accessing funds from the superannuation system. At present, there is no simple way of doing this – even though it will be increasingly necessary for many people. We need to create a seamless way of transferring significant portions of member balances from the superannuation system to the aged-care sector.
Over the past few years, the superannuation system has made it possible to transfer account balances between funds in a more efficient manner. Why not take the next logical step and extend that efficiency to the transfer of funds between superannuation and aged care? Streamlining the process would reduce some of the financial and time pressure on members and their families at what is often an emotionally challenging time.
Of course, this will require some proactive steps by the superannuation system in concert with the aged-care sector and government. One option could be to consider an expansion of the national payments platform or, more realistically, a refinement of the SuperStream legislation to allow the aged-care sector to intersect with the superannuation system.
Federal funding of aged care comes to more than $16 billion a year – a sum expected to increase by a further $1 billion each year. Therefore, the government has a vested interest in making it run as efficiently as possible, not to mention caring for people when at their most vulnerable.
Peter Murphy was formerly chief executive of Christian Super and is now senior consultant for boutique business advisory firm Robertson & Chang. He is also a director of BaptistCare, a large aged-care provider operating in NSW and the ACT.
Registrations are now open for the FEAL National Conference, in Sydney on August 2, 2017, where Murphy will be part of a panel addressing how superannuation funds can assist their members with the complex issues around entering aged care.