The Government agency in charge of the retirement village sector has hit out at retirement village owners and operators for "confusing contracts" presented to residents and their families.
Troy Churton, Commission For Financial Capability retirement villages national manager, described the contracts as difficult to understand.
"They are so complicated we found that even some lawyers who work in the field could not understand them," Churton said.
The retirement village industry was growing rapidly as the population ages, and villages increasingly include care facilities so they can market themselves as providing a "continuum of care", he said.
More than 70 per cent of villages now have care facilities on site and more than half New Zealand's care beds were on retirement villages sites.
But few residents understand that the independent living part of a village and the care facility operate under different regulatory regimes and different cost structures, Churton said.
The independent living side is regulated by the Retirement Villages Act and monitored by the Retirement Commissioner. But care facilities are under district health boards and monitored by the Health & Disability Commissioner, the statement said.
"A person who buys a license to occupy an independent living unit in a village may think they can move easily into the care facility on-site should they need to, but that's not necessarily the case," Churton said.
The process for moving into care was complex and the resident might face extra charges, he said.
"We believe retirement village operators are not explaining this clearly enough in their marketing and in the contracts they offer to intending residents. There needs to be better disclosure in the marketing and documents that tells consumers really clearly that if they're going to need care in the future, there are different pathways by which they may access that care, each with different cost implications," he said.
A report released by Churton recommends formal changes to the Retirement Village Code of Practice to require retirement village operators to provide greater clarity for people considering moving into a village and to simplify the jargon that could confuse both prospective retirement village residents and their lawyers.
"Every intending resident has to have independent legal advice on the documents they are about to sign. We stress how important it is to look at the terms of transfer between the village and the care facility," Churton said.
His report has gone to the minister responsible for retirement villages Phil Twyford.
In the meantime, consumers are being encouraged to go to www.cffc.org.nz for more information, or ring Seniorline on 0800 725 463.
Churton told people to ask village operators about the processes for transferring to care facilities and the different cost implications.
Graham Wilkinson, president of the Retirement Villages Association which lobbies for and represents the multi-billion-dollar owner/operators, today defended the sector.
He indicated the care bed aspect was not something some people wanted to think about when moving into villages.
"Contracts are clear. The owner-operators have done absolutely nothing wrong," Wilkinson said in response to the CFFC criticism of the sector.
"But when people move into villages, they know they might have future vulnerabilities and that there is a continuum of care available, should they need it. But they don't necessarily all want to know the details of that. The focus is not on that aspect when they move in," Wilkinson said.
"So if you ask them 'did you know about the care bed aspect of retirement villages' they might say they didn't, hence the findings of that report. Yet people are well-informed usually and one of the reasons they chose to buy into a retirement village is that they know of the continuum of care," Wilkinson said.
The standard charge for a New Zealand rest home or care bed was around $170/day, he said, "means-tested so taxpayers pay unless the person has assets over $227,000".
Premium care could cost an additional $10/day to $100/day, he said but provided much better facilities and a higher level of accommodation, he said.
Colin Porter, president of the Retirement Village Residents Association which lobbies for people who live in villages, has concerns. Contracts are not clear, he said, and he was one of the people who answered questions when the CFFC report was being written.
"A lot of the contracts are confusing. A lot of villages actually in their advertising put in that they provide a continuum of care. It's not set out how it occurs and what it costs so it's an issue at the moment and we have concerns," Porter said.
The Government subsidy for care beds was "insufficient", Porter said, and this aspect of retirement villages needed much more work to clarify and resolve issues.
David King of Ryman Healthcare said that business would not comment on the CFFC report but the Retirement Villages Association would.
Julian Cook, chief executive of the listed Summerset, said: "It's really important to us that incoming residents and their families or advisors have clear information about moving into our villages and care facilities. We re-did our contracts and marketing materials for people four years ago to make them much simpler to understand. We've had good feedback about them from residents and their advisers."
Summerset knew from experience and its own research that peace of mind for incoming residents was important, he said, because they want to know care is available in their village.
"We readily provide information on all the kinds of care you can receive, how to choose the best option for your needs, government subsidies, and the costs of care. Our staff are there to explain all the ins and outs to make everything much clearer for people," Cook said.
"We agree with the commission that disclosure of the right information at the right time is key and will be looking to make improvements where we can. It's worth noting everybody coming to a retirement village is required to get independent legal advice before they sign any contracts," Cook said.
John Collyns, Retirement Villages Association executive director, welcomed the CFFC report.
"We were involved in its development and we agree that the move to care should be transparent. The association is identifying where improvements can be made and will work with operators and regulators to ensure the process around the move is as transparent as possible," Collyns said.
"Offering a continuum of care is important for village residents, but it's also vital that they have a choice about where that care is delivered. Occupation Right Agreements (ORA) in a care room provides choice, as do premium charges and standard care rooms, and are an evolution in the way care is delivered.
"Our world-leading regulatory regime requires intending retirement village residents to seek legal advice about the contract they're signing, and that's true for an ORA in care as well. Operators recognise that the move from independent living to care must be transparent, and we stress the importance of involving professional advisors and family in the decision where to live," Collyns said.