Planners should receive more aged care training, says ASFA 

In its submission to the Aged Care Taskforce, the Association of Superannuation Funds of Australia (ASFA) said that greater availability of affordable financial advice was important in planning for aged care, and that super funds could play a role in the equation.

“The ageing of the Australian population structure will lead to a substantial increase in expenditure on aged care, particularly residential age care. This cost will fall on the Australian government unless there is greater cost recovery from users of aged care services,” the ASFA submission said.

“Current charging arrangements for residential aged care are complex: involving multiple components, capped fees, and means testing arrangements.

“Participants also have a choice between providing a refundable accommodation deposit (RAD) or paying a higher daily fee. Participants would benefit from greater availability of information and affordable financial advice in regard to options that are available.

“Superannuation funds could potentially be involved in such activities.”

Referring to previous ASFA research, the submission said there is an “expectation that financial advisers should be able to provide advice about all aspects of retirement, including private funding requirements for aged care”.

Pointing to complexity around retirement planning, ASFA said that it “highlights the need for any changes to aged care financing to support effective decision making by individuals”.

“This might in some cases require the provision of financial and other advice and guidance to the individuals concerned. How such advice and guidance is provided is important for its quality and cost,” it said.

“Arguably, there is a need for more financial planners to receive training in regard to aged care personal funding requirements and options that are open to individuals.

“There are regulatory requirements that constrain the ability of superannuation funds to provide financial advice in regard to matters that are not superannuation related, including the funding of such advice out of an individual’s superannuation account or the funds of a superannuation fund more generally. However, individuals who have retired are able to withdraw amounts and to use such amounts for expenses.”

According to ASFA estimates, which it said are based on Productivity Commission and other data, there are about $8.5 billion a year in inheritances flowing from the repayment of RADs to the estates of participants.

Further, this figure equates to almost three times the annual amount attributable to superannuation balances of retirees still held at the time of death.

ASFA said it would be “challenging” to finance current residential aged care charging structures by directly linking to superannuation but said there are some options.

“There are possibilities for superannuation funds to assist further with capital funding requirements by holding direct or indirect interests in the property assets used to provide aged care accommodation services on commercial terms,” the submission said.

“In addition, the majority of Australians will have more money in superannuation going forward and this will be crucial to meet expenses in retirement including aged care.”

While it added that sufficient government support is “essential for older Australians without the capacity to financially contribute to their aged care needs”, a HECS style system could be implemented.

“This could involve a loan arrangement similar to the Higher Education Contribution Scheme (HECS) for some aged care costs. This could build on the current Home Equity Access Scheme administered by Centrelink that is available to persons who have reached the eligibility age for the age pension,” it said.

ASFA deputy chief executive officer Glen McCrea said superannuation is there to assist people with handling the unforeseen challenges that life and retirement invariably bring.

“Calls to ring fence superannuation for increased aged care costs would create unnecessary complexity and cost and reduce flexibility for older Australians,” Mr McCrea said.

“Many current retirees do not have a large amount of superannuation from which to fund increased aged care costs. In fact, only a small minority of Australians aged over 80 have any superannuation at all.”