If the superannuation industry is truly committed to helping members achieve dignity in retirement, it must improve interactions with the aged-care system.
OPINION | The interaction of superannuation with the aged-care sector is a topic that has prompted much discussion for many years. Health and aged-care providers, consumer advocates and policy groups dominate the discussion. Some question whether the aged-care debate is one the superannuation industry should weigh in on. To my mind, the answer to that is a resounding yes.
The Productivity Commission, in its 2011 report Caring for Older Australians, outlined a future reality of service strain in aged care.
Key findings included that: the number of Australians aged 85 and over is projected to increase from 400,000 in 2010 to 1.8 million (5.1 per cent of the population) by 2050. By then, it is forecast, more than 3.5 million older Australians will access aged-care services each year, with about 80 per cent of services delivered in the community. Increases in the public cost of aged care are inevitable, given the growing longevity of older people and the lifetime risk of requiring aged care.
It is inevitable that super fund members will interact with the aged-care system in some way. Increasingly, this interaction will be with the complex residential-care system. This means our sector must have meaningful conversations to drive integration with aged care. As a country, we are measured by the benevolence we show our most vulnerable.
Dignity in retirement is a right for everyone, not just the lucky ones. Efforts to make this ideal a reality could benefit from some collective thinking from the super industry.
One area that deserves more focus is the crucial role financial advice has to play in helping members assess their personal needs as they plan for aged care. Specialist aged-care advice can help members make informed decisions for themselves, or their family members, before those decisions are time critical. At HESTA, we have financial planners who are accredited to provide advice on aged care. Industry Fund Services is developing a program to support funds by providing a pool of accredited financial planners.
More broadly, there is an opportunity for the financial planning sector to explore how advisers could be advocates for clients, negotiating on their behalf with aged-care providers.
Another area worthy of focus is what role super funds might be able to play in the provision of financial products designed to help members access aged care. This conversation needs to be industry led and should have the broad aim of ensuring that access to quality aged care is not dependent on income.
In its recent consultation on developing a framework for Comprehensive Income Products for Retirement (CIPRs), Treasury asked the industry for comment on the possibility of a product that would include some formal interaction with aged care. Notably, this seems to have been posed as a solution for the apparent problem of retirees holding onto their savings. The driver for product development should be equity of access for those with minimal savings. This might mean the industry needs to start seriously considering equity release products, or allowing direct interaction between super drawdowns and payments to aged-care providers.
A third important area of focus is the aged-care system itself. If funds accept that most of our members will eventually have to use the aged-care system, then we have an obligation to question whether that system is structured to their advantage.
What tax and social security policies are currently discouraging product innovation? Should the super system play a broader advocacy role as reform to government subsidies is contemplated, with its potential impact on the eligibility of our members for pension entitlements?
One thing is clear, interaction with the aged-care system is inevitable for the majority of Australians. A sophisticated retirement system such as ours should be able to account for this comprehensively, to deliver equity of access and a fair policy structure.
Mary Delahunty is the general manager, business development and policy, at HESTA.