Retirement villages offer essential services but have complex financial structures disadvantaging residents, especially when leaving.
Residents face delays in receiving their money back, with deferred management fees and reliance on resale.
Ingrid Leary’s bill aims to ensure quicker capital repayments, advocating for a fairer system for seniors.
As I approach the end of my 50s, I find myself contemplating how I want to spend the later years of my life.
Ideally, I envision a future surrounded by loved ones in a safe and supportive environment. However, the reality is families often move on, with manyliving overseas, and independent living may become less feasible as one grows frail.
For many New Zealanders, retirement villages present the only viable option for their later years. But, as the saying goes, “buyer beware”.
I want to start this by acknowledging retirement villages offer an important service. Many of our elders can’t stay in their homes because of health challenges or social isolation. They seek the companionship and support of a retirement village. And the majority of residents say they are very satisfied with their retirement village (albeit in a survey commissioned by the Retirement Villages Association).
The trouble tends to start when people try to leave.
See, when you move into a retirement village, you’re usually not buying your unit. You’re buying a “licence to occupy” that unit. It doesn’t come cheap. “Anything from $200,000 to over a million dollars,” according to Consumer NZ. Not including regular fees for running the village, with food and medical costs on top, again.
It’s quite different from renting, where a tenant’s bond is held by the government, ensuring it is readily available for refund upon departure. In retirement villages, that money goes to the operators. You can’t borrow against your unit because you don’t own it, but the operator can leverage your capital payment to fund new projects.
This is the secret sauce of retirement villages: the residents pay the operating costs, their upfront fee covers the village operator’s capital investment and can be used to build new villages, and any capital gains usually go to the village operator, untaxed.
Residents face delays in receiving funds after leaving, with significant fees and risks involved. Photo/ Unsplash
When a resident moves out or dies, that initial capital payment comes back to them or their estate – minus a “deferred management fee” of 20-30%. Easy to say, but that can amount to hundreds of thousands of dollars on top of the weekly fees.
It gets worse. You don’t get your money back until someone else takes up the licence to occupy your unit. That sale is in the hands of the village operator (although you pay the marketing costs) and, usually, the retirement village also pockets any capital gain.
The chance to gain money on the sale sits with the village operator. The risk of not being able to sell sits with the resident. Reminds me of that kids’ game: heads: I win; tails: you lose.
Residents often leave out of necessity, such as needing more advanced healthcare, but face prolonged waits to get what’s left of their money (five and a half months on average, according to the Retirement Villages Association president).
It’s a distressing situation for people who have worked hard for their money and need it to pay for their new accommodation.
Consumer NZ wants law changes to fix a system it says is heavily weighted in favour of village operators.
Ingrid Leary's bill seeks to ensure quicker capital repayments and a fairer system for seniors. Photo / Mark Mitchell
Leary hopes Government parties will support her bill. Minister for Seniors Casey Costello has committed to the NZ First-National coalition agreement, which includes a review of the Retirement Villages Act. Associate Housing Minister Tama Potaka says the review’s focus will include “options for incentivising or requiring capital repayments when residents move out of a village”.
This feels like a chance for a real cross-party solution.
This is not merely a financial issue; it’s about dignity and respect for our elders.
The current system is failing many of our seniors. They have contributed to society throughout their lives, yet, in their later years, they often find themselves navigating a complex and unyielding system that does not prioritise their needs. As a community, we must protect the rights of our seniors.
