Napier CAB manager Jenny Pearce
OPINION:
At the Napier Citizens Advice Bureau, we are always busy researching and answering enquiries on an amazingly wide range of matters. Fortunately, we have immediate access to an excellent range of resources enabling us to provide accurate information to our clients.
In Napier there are already several retirement villages, and now two large new ones are currently advertising open days for people who may be interested in shifting to one of their newly completed apartments/villas. We expect many people to be thinking ahead as to whether a retirement village might be right for them. The following are some of the questions and answers you might want to consider.
What defines a retirement village?
Retirement villages must be registered and come under the provisions of the Retirement Villages Act 2003. They usually provide all, or some, of the following living arrangements — independent living in a villa, townhouse or apartment situation; assisted living (to the extent you need) in a serviced apartment; and resthome, hospital and dementia care.
What are the differences from the financial point of view?
In most retirement villages, if you are going into an apartment to either live independently, or with some assistance, you will need to purchase an Occupation Right Agreement for your unit. This upfront cost is likely to be several hundred thousand dollars. Only a small minority of villages (none in Napier, to our knowledge) give the ability to purchase the title to your villa or apartment. As well as the upfront cost to purchase the Occupation Right Agreement, you will pay a regular operating fee to the village owner to cover the ordinary costs of running the village, including maintenance, staffing costs, insurance, rates and utility bills.
In effect, a resident is swapping paying outgoings on their own home for paying a share of the outgoings on the village. We have read recently that the average operating fee being charged by retirement villages is around $125 per week. Apartment owners still pay their own costs for electricity, telephone, contents insurance, and Sky, if applicable.
What are the differences between a retirement village and a resthome?
It can be confusing as many retirement villages also provide resthome, hospital and dementia care within the village. If so, they need to register with the local District Health Board and are subject to audits and the Health and Disability Services Standards 2008. People assessed by the DHB as needing full resthome, hospital or dementia care in the retirement village, will be expected to meet the full cost, which could be in the $1000 per week range. But subject to an assessment of your assets and income, you may qualify for the Government's Residential Care Subsidy which could cover all, or most of the cost. Call Work and Income's Residential Care Subsidy Unit on 0800 999 727 for full information on eligibility, including what assets and funds are protected. If the subsidy is approved, NZ Super no longer applies. Just a modest allowance for personal expenses and clothing may be payable.
Vacating your retirement villa, townhouse or villa
This is something to be very clear about, before committing to purchasing in a retirement village. For most of the villages, when you come to vacate the unit, for whatever the reason including moving to resthome care, the hospital, or death —
• There will be no capital gain from your original purchase price.
• The village operator will retain 20-30 per cent of your original purchase price as a deferred management fee to cover refurbishment costs before on selling to a new occupant.
• Paying out what is due to you, or your estate, may not occur until your unit is resold.
• The weekly operating fee may continue to be payable until the unit sells.
Transferring within a village
It is also important to be aware of what may be involved if your needs change and you need to move from living independently in an apartment within the village to an assisted living unit. Ask the village operator whether their deferred management fee will apply when your apartment is sold and again when you vacate your assisted living unit. Also, for couples, be clear on what happens to you both if just one of you is assessed as needing full rest home, hospital or dementia care.
Do retirement villages have an entry age requirement?
We believe most of the major village operators are now stipulating 70 as their minimum entry age. But depending on demand, they may have some flexibility.
Will a retirement village be right for you?
It is a big decision requiring most careful consideration. Ideally, the move to a retirement village should be your last move. Some of the steps to be taken, before finally deciding, should include:
• Visiting retirement villages in the area to inspect the facilities and talk to the management and some of the residents. If it is one of the brand new villages, currently under development, visit others, especially ones owned by the same operator.
• Will you like the village lifestyle and want to get involved?
• Compare the costs to live there, compared with what you are paying at present. There should be savings from rates, buildings insurance, major maintenance, and appliance replacement costs, etc. They mow the lawns and can care for your gardens.
• Depending upon the value of your present home and the cost to acquire a village unit, the move could free up capital for future travel, car upgrading etc.
• But are you ready to downsize, disposing of most of your furniture and effects to buy new items more suited to your new place in the village?
• If you have pets, find out the village policy as to whether they are allowed.
• Talk it through with your family. Will they see the move having a material effect on their future inheritance?
• Most importantly, the law requires that you get independent legal advice, before committing. Preferably from a lawyer with specialist retirement village experience.
■ For more information or support, contact us at the Napier Citizens Advice Bureau when we are open 9am until 4pm on Monday to Friday and 9.30 to 10.30am on Saturdays. We are at 126 Hastings St (above the BNZ, Napier). No appointment necessary. Or ring us on 06 8359664 or email anytime to napier@cab.org.nz. We are here to help, and confidentiality is assured.
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